Why Are Banks Being Told to Use Responsible AI in Banking?

Banks are being pushed into a new phase of digital responsibility. The latest government note signals a major shift in how complaints, data and customer-facing systems will work.

Why do some banks still miss small issues that trouble customers. The Finance Ministry raised the same point in its 2025 review when it asked public lenders to grow Responsible AI adoption in banking and use data analytics for customer service improvement. Public banks had shown ₹93,675 crore profit in the first half of the financial year 2025.

What Triggered This Call for Better Tech in Banks?

The Department of Financial Services placed a fresh report in late 2025. It tracked credit and deposit trends and then pushed banks toward Finance Ministry AI guidelines. The note said banks must treat customer pain points as early warnings. And digital traffic is getting heavier by the month, something most bank teams admit quietly.

Before the table, one point stayed firm. The Ministry wants enhanced customer experience through technology, not just backend clean up.
 

The message was simple: profits are rising, but service quality must rise at the same pace.

What Banks Are Being Told to Fix?

People hear “Responsible AI” often but few know what it means inside banks. It simply means tools that are checked, reviewed and safe to use on customer data. Data analytics is just a method where large records get studied to spot patterns. 

Public sector bank digital transformation covers many tasks, like online loan journeys or faster user checks that avoid long queues. It feels strange sometimes how these simple steps take time to reach daily banking. A LoansJagat update in 2025 estimated that digital footprint loans may hit ₹1,00,000 crore by FY26.
 

Banks see these numbers and know the shift is real. Some teams are still catching up.

This development connects with an older story on AI use in complaint handling by the Reserve Bank. The report, dated March 2025, pointed to rising customer issues and the need for tech checks. The tone matched this new Ministry note in many ways.

How This Update Connects With Earlier Tech Pushes

Older reviews in 2023 and 2024 talked more about asset quality and credit flow. This time the voice turned toward customer touchpoints. 

Banks earlier fixed numbers first. Now systems and screens get equal weight. And sometimes that feels overdue because many customers said the same for years.

Conclusion 

The path ahead is visible. The Finance Ministry wants responsible AI in banking, stronger data analytics and deeper digital transformation across public sector lenders. These are not concepts on paper anymore, they are now performance expectations.

Growth may attract headlines, but customer trust keeps the system stable. And trust grows only when technology respects customer time, information and experience.

That is how most people see it anyway.

 

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.