AI With Accountability: RBI Deputy Urges Banking Sector To Create Self-Regulatory Code For AI Governance

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The RBI Deputy Governor has urged India’s banking sector to create a self-regulatory code for AI governance. The framework would address transparency, bias, and accountability, complementing formal oversight. The move aims to balance innovation with ethical safeguards as AI adoption accelerates across lending, compliance, and customer engagement platforms.

India’s banking industry has been urged to proactively develop a self-regulatory framework for the use of artificial intelligence (AI), as per remarks made by a Deputy Governor of the Reserve Bank of India (RBI). The call reflects growing regulatory interest in balancing innovation with ethical safeguards.

Key Highlights

- The RBI Deputy Governor emphasized that while AI offers transformative potential in banking—from fraud detection to customer service—its deployment must be governed by responsible standards

- He recommended that industry stakeholders collaborate to draft a voluntary code of conduct that addresses transparency, data privacy, algorithmic bias, and accountability

- The proposed framework would complement existing RBI guidelines and help preempt regulatory gaps as AI adoption accelerates

- The Deputy Governor noted that a self-regulatory approach would allow flexibility and innovation while ensuring consumer protection and systemic stability

- He cited global examples where financial institutions have adopted internal AI ethics boards and audit mechanisms

- The remarks were delivered at a fintech and banking conference attended by senior executives, regulators, and technology experts

- The RBI is currently studying AI use cases across lending, risk management, and compliance to inform future policy directions

Strategic Takeaways

- The RBI’s stance signals a shift toward co-regulation, where industry-led norms support formal oversight

- Banks and fintechs are expected to collaborate on best practices, possibly through industry bodies like IBA or FICCI

- A self-regulatory code could include provisions for explainable AI, human-in-the-loop decision systems, and periodic audits

- The initiative may also help Indian banks align with global standards such as those from the OECD and BIS

Market Outlook

- AI adoption in Indian banking is projected to grow at 22 percent CAGR over the next five years

- Regulatory clarity and ethical safeguards are seen as critical to sustaining investor and consumer trust

- Institutions that lead in responsible AI may gain competitive advantage and reputational strength

- The RBI’s consultative approach is expected to foster innovation without compromising systemic integrity

Sources: Reserve Bank of India Public Address, Economic Times Fintech Desk, Mint Banking Tracker, Business Standard Regulatory Briefs 2025, FICCI AI Governance Roundtable Notes

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