India’s financial sector is witnessing a fascinating confluence of challenges and innovations. The Reserve Bank of India (RBI) is grappling with liquidity management while fintech companies are unleashing the power of artificial intelligence. Let’s examine these pivotal shifts and their implications.

RBI’s Liquidity Balancing Act

The new RBI governor, Sanjay Malhotra, has stepped into a hot seat, inheriting a banking system wrestling with liquidity deficits. Currently, the deficit stands at a significant Rs 2.1 lakh crore. This tightness is largely due to the RBI’s interventions in the forex market and a slowdown in government spending. Since December, the RBI has injected a massive Rs 49.18 lakh crore to ease the crunch, yet volatility persists. The weighted average call money rate remains above the repo rate, signalling continued stress.

The governor’s dilemma is stark: too much liquidity could fuel inflation, while too little could stifle the banking system. It’s a tightrope walk, demanding deft management to balance growth and stability. Unlike his predecessor, Malhotra faces a far less predictable monetary environment, requiring an active, interventionist approach to liquidity management.

AI Reshapes Fintech Frontier

While the RBI navigates liquidity, companies like Razorpay are leveraging artificial intelligence to revolutionise financial services. At its recent FTX’25 event, Razorpay unveiled a suite of AI-powered products. These include corporate cards designed for startups with AI-driven expense tracking, buyer protection for e-commerce to build consumer trust, and RAY Agentic-AI, an AI toolkit to automate payments and provide real-time financial intelligence.

These innovations are not merely incremental improvements; they represent a paradigm shift. AI is poised to streamline onboarding, enhance security, and offer personalised financial experiences. Razorpay’s move into marketing solutions with AI-powered gift cards further indicates a holistic approach to customer engagement, beyond just payment processing. This signifies a maturing fintech landscape in India, moving towards sophisticated, AI-driven solutions.

Banking on Focused Strategies

Traditional banks, too, are adapting to the evolving landscape. Federal Bank’s new CEO, KVS Manian, is focusing on bolstering current account deposits and wealth management to enhance profitability. Recognising the lower cost of current account deposits and the loyalty of their NRI customer base, Federal Bank is strategically targeting these areas for growth. This focused approach signals a broader trend: banks are refining their strategies to thrive in a competitive and rapidly changing financial world.

Will Malhotra be able to maintain the delicate balance of liquidity while keeping inflation in check? And can AI-driven fintech solutions truly transform the financial experience for businesses and consumers alike? The answers to these questions will shape the trajectory of India’s financial future in the months to come.

Image Courtesy: X (RBI)