AI Fraud on the Rise: Sitharaman Urges Fintechs to Strengthen Risk Defenses

Finance Minister Nirmala Sitharaman issued a clarion call to India’s fintech industry on Tuesday, urging firms to strengthen risk management practices to combat the growing misuse of artificial intelligence (AI) by criminals. Speaking at the 6th edition of the Global Fintech Fest 2025 in Mumbai, she highlighted the dual nature of AI, which powers innovation but also enables sophisticated frauds like voice mimicking, identity cloning, and lifelike deepfake videos. “I’ve seen deepfake videos of myself circulating online, manipulated to mislead citizens. This is a wake-up call to fortify our defenses,” Sitharaman said, emphasizing the urgency of addressing these threats.

The minister also unveiled the Foreign Currency Settlement System (FCSS) at GIFT IFSC, positioning it among elite global financial hubs like Hong Kong, Tokyo, and Manila by enabling real-time or near real-time foreign currency transactions. This development underscores India’s ambition to become a global leader in financial and technological innovation.

Sitharaman spotlighted India’s potential to emerge as a hub for AI product development, advocating for solutions rooted in Indian languages, local contexts, and multimodal interfaces to ensure accessibility for all citizens. “India can be a laboratory for developing and testing AI ideas, positioning us as the AI torchbearer for the Global South,” she said. However, she cautioned that the same AI tools driving progress are being weaponized for deception, with fraudsters “hacking trust” rather than traditional firewalls.

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India’s fintech sector, a global powerhouse, has transformed everyday transactions, with Unified Payments Interface (UPI) processing over 18,580 crore transactions worth ₹261 lakh crore in 2024-25. Nearly half of the world’s real-time digital transactions occur in India, with an adoption rate of 87% compared to the global average of 67%. Sitharaman credited this success to India’s digital public infrastructure and initiatives like the Jan Dhan Yojana, which connected over 56 crore people—equivalent to the European Union’s population—to the formal banking system in a decade.

The minister also highlighted the impact of the Direct Benefit Transfer (DBT) system, which has saved ₹4.31 lakh crore by reducing leakages and increasing beneficiary coverage 16-fold between 2014 and 2024. “Shifting from paper-based disbursals to digital transfers ensures public funds reach the intended recipients,” she noted.

Sitharaman urged fintechs to focus on fundamentals like revenue growth, innovative products, profitability, and robust risk and compliance frameworks. “Responsible regulation is not a brake on progress; it’s a seatbelt for safe acceleration,” she said, encouraging the sector to bridge remaining gaps in financial inclusion. With 650 million smartphone users, she envisioned scalable AI-driven models extending beyond finance into sectors like healthcare, education, agriculture, MSMEs, and exports.

The Global Fintech Fest 2025 served as a platform to showcase India’s fintech dominance, with the country ranking third globally in the number of fintech companies. Sitharaman’s address underscored the need for vigilance against AI misuse while leveraging India’s technological prowess to drive inclusive growth and global leadership in the digital economy.

Also Read: Finance Minister Launches Real-Time Foreign Currency Settlement System in GIFT City