Sitharaman calls AI a ‘double-edged sword’, urges soft-touch regulation and faster digital rupee push

Finance minister Nirmala Sitharaman called artificial intelligence a “double-edged sword” that could strengthen fraud detection but also enable sophisticated attacks, as she urged regulators to explore a soft-touch framework for emerging technologies, step up coordination and accelerate the Reserve Bank of India’s digital rupee initiative.

Speaking at the Global Fintech Fest 2026, Sitharaman warned that agentic AI, which can autonomously execute actions, could amplify operational and systemic risks because errors, fraud and market shocks could spread at machine speed.

“AI acts as a double-edged sword. It helps us spot fraud faster, but it also allows attackers to automate larger, more sophisticated cyber-attacks,” she said.


Sitharaman also said she had discussed with the RBI whether emerging technologies could be regulated without constraining innovation. “Is there a way in which we can do a soft touch regulation… without affecting the innovative threshold?” she said.

The finance minister also urged the central bank to deepen its work on the digital rupee as tokenisation gains ground in financial markets.

“I urge the Reserve Bank of India to further advance… both the wholesale and retail CBDC pilots,” Sitharaman said, adding that RBI needs to “continue to sharpen its capabilities with the digital rupee.”

Sitharaman also pushed back against what she described as pessimism around India’s demographic dividend, saying the country’s young population was already translating into entrepreneurship, technology-led growth and new businesses.

Taking a swipe at habitual critics, she referred to them as “naraz fufajis” who continue to question whether India’s growth can keep pace with its youth, arguing that young Indians were instead “building platforms, scaling enterprises” and turning the country’s median age into a competitive advantage on the path to 2047.

Sitharaman said responsibility for AI deployment cannot be left solely to technology teams. Boards, senior management and regulators need to understand where AI is being deployed, what decisions it influences, the data it relies on and the potential consequences if systems fail.

“AI may assist judgment, but responsibility must remain human and institutional,” she said. Higher-risk applications, she added, would require stronger review, explanation and appeal mechanisms.

However, she cautioned against responding to these risks by avoiding the technology altogether, saying institutions that fail to adopt AI could become less competitive. “The real choice is between responsible adoption, well-managed adoption,” she said.

The finance minister also proposed creating a broader industry platform to help Indian technology companies navigate increasingly fragmented global regulations.

“There may therefore be merit in considering a federated industry platform that brings together the broader Indian technology ecosystem,” she said. Such a body could engage foreign governments and regulators, work towards interoperable standards, share cybersecurity practices and give Indian companies a collective voice as global technology rules take shape.

Sitharaman also called for greater coordination among financial regulators, competition authorities, data protection authorities and cybersecurity agencies to ensure activities do not escape oversight simply because they fall between regulatory jurisdictions.

At the same time, she backed greater self-regulation by fintech and technology firms operating outside the traditional regulatory perimeter. “Where the regulator's writ ends, your own standards must begin,” she said.