RBI To Set Up Panel For Ethical Use Of AI In Financial Services

The Reserve Bank of India (RBI) has announced setting up of a committee to develop a framework for the responsible and ethical use of artificial intelligence (AI) in the financial sectors. 

The committee’s mandate includes addressing critical challenges such as algorithmic bias, decision explainability, and data privacy, while also laying out a roadmap for sustainable AI integration.

Following the RBI’s Monetary Policy Committee meeting, governor Shaktikanta Das said, “The financial sector landscape is undergoing rapid transformation, driven by technologies like AI, tokenisation, and cloud computing. To harness the benefits of these technologies while mitigating associated risks such as algorithmic bias, explainability, and data privacy, a committee comprising experts from diverse fields will be established.” 

“This committee will recommend a framework for responsible and ethical enablement of AI (FREE-AI) in the financial sector,” he added.

The proposed committee will include specialists from various disciplines and aims to deliver a robust, comprehensive, and adaptable framework tailored to the financial sector’s needs.

The RBI emphasised the importance of early intervention to address AI-related risks. “While the advantages of AI are significant, the associated risks, including algorithmic bias, explainability of decisions, and data privacy concerns, are equally substantial. To fully harness the benefits, these risks must be addressed at the early stages of adoption,” the central bank said.

Earlier, Governor Das highlighted the vulnerabilities introduced by AI, including heightened risks of cyberattacks and data breaches. He also pointed out that the opaque nature of AI systems complicates the auditing and interpretation of algorithms underpinning financial decisions.

In addition to this announcement, the Reserve Bank of India (RBI) made other announcements like introducing an AI/ML-powered model called MuleHunter.AI to detect mule bank accounts, allowing small finance banks (SFBs) to offer pre-sanctioned credit lines through the Unified Payments Interface (UPI), among others.

Das also said that the RBI will introduce podcasts as a new medium of communication, further expanding its outreach initiatives.

As per government data, Indians lost as much as INR 11,333 Cr to cyber fraud in just the first nine months of 2024. Notably, the country saw as much as 6.32 Lakh cases of UPI frauds worth INR 485 Cr in the first six months of the ongoing financial year 2024-25 (FY25)