‘AI a double-edged sword’: FM Sitharaman flags innovation risks, urges efficiency without fragility

Finance minister Nirmala Sitharaman described artificial intelligence as “a double edged sword”, warning that while it can help detect fraud, it can also be used to perpetrate it. Speaking at the Global Fintech Fest 2026, Sitharaman also added that innovation should expand efficiency without creating new forms of systemic fragility.Cautioning about the risks linked to artificial intelligence, large language models and cyber threats, she highlighted that technology can influence society and even electoral outcomes. Sitharaman said, "The model that I'm referring to is fully capable of influencing opinion on the ground without people even sensing that they are being influenced...I'm therefore glad that just yesterday, September 10, the Reserve Bank of India recognised the Unified Fintech Forum as another self-regulatory organisation for the fintech sector under the SRO-FT framework."Sitharaman said regulation would have to strike a balance between supporting innovation and addressing these risks. She said she had discussed with the Reserve Bank of India the need for “soft-touch regulation” that does not curb innovation.She welcomed the RBI's recognition of the Unified FinTech Forum as a self-regulatory organisation under the SRO-FT framework, saying it showed the central bank was responding to the changing needs of the fintech sector. She also called for the RBI to further advance its wholesale and retail Central Bank Digital Currency (CBDC) pilot.The minister also spoke about India's young population and its role in driving innovation and economic growth. She dismissed doubts over the country's demographic dividend, saying young Indians had moved past such cynicism and were already building for the future.Addressing the event, Sitharaman said India's younger generation was "already writing tomorrow’s code, building enduring enterprises and proving that India’s greatest demographic advantage is an active, unstoppable reality."She said the energy and ambition shown by thousands of participants at the event reflected the strength of India's demographic advantage.“We are seeing it translate into monumental strides from building the world’s most powerful digital public infrastructure with UPI processing billions of transactions, to standing tall as the fastest-growing major economy and breaking frontiers in space exploration,” she said.Around 8,000 organisations were represented at the Global Fintech Festival. Sitharaman said fintech firms made up 20% of participants, financial institutions 25%, technology-related entities 43% and support services 12%.Get the latest Business News and Live updates. Download the TOI app.