AI framework charts next chapter for Indian banking

The FREE AI Committee Report heralds anew era for Indian banking by providing a framework to both harness and regulate artificial intelligence.

- KARTHIK PASUPATHY

The Reserve Bank of India (RBI) report presents a roadmap that highlights not only the opportunities enabled by AI, but also challenges and responsibilities for banks and financial institutions.

‘The framework emphasises robust governance, clear accountability for Al, drafting of policy, risk management, and ethical guardrails. It calls for metrics to ensure fairness and diversity in Al outcomes, with banks expected to monitor, report, and actively mitigate algorithmic bias to ensure inclusivity.

Under the framework, banks are encouraged touse Alto streamline operations, boost customer engagement, and strengthen risk management. AI models for banking can deliver faster loan processing, enhanced credit scoring, and agile regulatory compliance. The framework urges integration with India’s Digital Public Infrastructure (Aadhaar, Unified Payments Interface or UPI, and account aggregators) as a way to drive financial inclusion. For example, UPI transaction records and mobile usage data can be used as alternative sources of data, assessed using Alto increase the spread of credit availability. While the framework sets a progressive foundation, several critical areas require attention for clarity: