RBI Report on AI in the Financial Sector
The Reserve Bank of India (RBI) has released a report focusing on the integration of artificial intelligence (AI) within the financial sector. The report aims to guide regulated entities and promote AI-driven innovations, particularly for enhancing financial inclusion among underserved populations.
Key Recommendations
- Regulated entities should develop a board-approved AI policy.
- Regulators are advised to support AI innovations that facilitate financial inclusion.
Framework for Responsible and Ethical Enablement of AI (FREE-AI)
In its December 2024 monetary policy statement, the RBI announced the formation of a committee to develop the FREE-AI framework.
- The committee has introduced seven foundational principles, known as Sutras, for AI adoption.
- A total of 26 actionable recommendations have been made across six strategic pillars.
- The vision is to align innovation with risk mitigation in the financial ecosystem.
Seven Sutras for AI Adoption
- Trust is the foundation that ensures reliability in AI applications.
- People first; prioritises human-centric design.
- Innovation over restraint encourages creative growth.
- Fairness and equity; promote justice and impartiality.
- Accountability demands responsible AI usage.
- Understandable by design; ensures transparency and clarity.
- Safety, resilience, and sustainability; focus on long-term effectiveness and robustness.
Committee and Recommendations
- Recommendation for the RBI to issue a consolidated AI guidance document for regulated entities and the broader fintech ecosystem.
- Suggestion for a permanent, multi-stakeholder AI standing committee under the RBI for ongoing advisory roles.
- Proposal to enhance product approval processes, consumer protection frameworks, and audit mechanisms to include AI-specific considerations.