RBI's AI panel calls for balancing innovation with risk mitigation

The Reserve Bank of India's (RBI's) Committee on the Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the financial sector has recommended an approach that treats the objectives of fostering innovation and mitigating risks as complementary forces to be pursued in tandem.

- SUBRATA PANDA

The FREE-AI committee was constituted by the RBI to encourage the responsible and ethical adoption of AI in the financial sector.

The committee outlined seven "sutras"—core principles to guide AI adoption in the financial sector: trust is the foundation; people first; innovation over restraint; fairness and equity; accountability; understandable by design; and safety, resilience, and sustainability.

It observed that AI has the potential to unlock new forms of customer engagement, enable alternative approaches to credit assessment, improve risk monitoring and fraud detection, and offer new supervisory tools.

However, it cautioned that increased AI adoption could also lead to new risks such as bias and lack of explainability, while amplifying existing challenges related to data protection, cybersecurity, and more.