SBI chief flags risks in rapid growth in digital finance, stresses trust-based innovation

State Bank of India Chairman C S Setty on Monday cautioned that rapid growth in digital finance, platform lending and data-driven underwriting is creating new vulnerabilities in the financial system, and said resilience must evolve alongside innovation.

Speaking at the CII Annual Business Summit, Setty said banks and financial institutions must continue strengthening governance frameworks, capital buffers, cybersecurity capabilities and risk management systems.

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He said as the banking system undergoes technological transformation, India's financial architecture would have to remain resilient with trust embedded in all innovation.

"As India's financial system expands in scale and complexity, trust must remain its foundational principle. Innovation without trust cannot sustain itself. The rapid growth of digital finance, platform lending and AI-driven underwriting creates new opportunities but also new vulnerabilities," he said at a session on 'The Future of Financing'.

Setty warned that cyber risks, operational vulnerabilities, algorithmic biases and increasing systemic interconnectedness could pose significant challenges for banks and financial institutions if governance and risk management frameworks do not evolve alongside innovation.

He said maintaining public trust would remain critical as India expands digital financial services and deepens formal credit penetration across sectors such as MSMEs.

"Speed must never come at the cost of safety and innovation must never undermine inclusion. "Ultimately, the Indian customer must continue to feel secure and confident in the integrity of our financial system. That confidence is our greatest institutional asset," Setty said.

The SBI chairman also said India would need massive capital mobilisation to achieve the Viksit Bharat goal by 2047, with estimates suggesting investment requirements of Rs 3,000 lakh crore to Rs 3,500 lakh crore over the coming decades. Around Rs 600 lakh crore to Rs 650 lakh crore would need to be mobilised by 2035 alone, he said.

Setty said banks alone would not be able to finance India's long-term development needs and called for deeper bond markets and greater participation from mutual funds, pension funds and insurance companies.

"90 per cent of bank balance sheets today are built through deposits. But the nature of savings flows is changing," he said, noting that household financial savings were increasingly moving towards mutual funds, insurance and retirement products.

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He said public capital expenditure had acted as a major catalyst for private investment, pointing to the rise in government capital spending from about Rs 2 trillion in 2014-15 to a budgeted Rs 12.2 lakh crore in 2026- 27.

According to Setty, institutions such as the National Bank for Financing Infrastructure and Development and the National Investment and Infrastructure Fund, along with instruments such as infrastructure investment trusts and REITs, were helping deepen India's infrastructure financing ecosystem.