AI will be a bigger leap for banking than digitisation, says IDFC FIRST Bank CEO V Vaidyanathan

According to fresh market updates, Artificial intelligence will have a bigger impact on banking than the shift to digitisation, IDFC FIRST Bank Managing Director and CEO V Vaidyanathan stated at the Moneycontrol Startup Conclave 2026 on Saturday, as lenders increasingly use technology to expand credit delivery and improve customer experience.

“When digitisation came, it dramatically changed banking. AI will be a bigger leap than that,” Vaidyanathan stated.

He stated AI would allow banks to improve the way customers interact with financial institutions and deliver services at a scale that was difficult earlier.

“AI is going to enable customer experience in a meaningful way,” he stated.

IDFC FIRST Bank is now disbursing around 15 lakh loans a month, Vaidyanathan stated, with many of those loans reaching customers at the softer end of the income spectrum.

“This could not have happened before,” he stated.

The bank has progressively moved more of its lending processes online. In its FY25 annual report, IDFC FIRST Bank stated it had developed digital and paperless lending processes across parts of its business, including systems that use data such as GST returns to speed up access to credit for small businesses.

Vaidyanathan stated the convergence of India’s demographics, its digital infrastructure and advances in AI was additionally creating opportunities for startups.

“The big opportunity for startups is that we are now combining demographics, the Indian digital ecosystem, and the AI wave,” he stated.

At the same time, he cautioned that the technology could be deployed for vastly different purposes.

“AI is like nuclear energy. You can use it to create electricity and additionally bombs,” Vaidyanathan stated.

Vaidyanathan additionally stated financial institutions need to account for the consumer-protection focus of banking regulation while designing their business models.

“As a regulated industry, we should always anticipate that the regulator will be pro-consumer,” he stated. “We have as a result learnt to internalise it and readjust our models based on that.”

Vaidyanathan additionally welcomed the introduction of merchant discount rates on a limited set of UPI transactions, saying banks remained central to the processing of digital payments.

“End of the day, all transactions are going through banks. It is good news, and grows the ecosystem,” he stated when asked around MDR.

The government this month introduced an MDR framework for specified merchant UPI payments above Rs 2,000, while keeping person-to-person transactions and the vast majority of merchant payments free.