RBI Plots a Code of Conduct: Ethical AI to Take Center Stage in Fintech

The Reserve Bank of India (RBI) is gearing up to introduce a thorough framework aimed at the responsible and ethical use of Artificial Intelligence (AI) in the financial sector within this fiscal year. This move marks a significant change in how digital governance and risk management are approached by banks, fintech companies, and non-banking financial institutions (NBFCs).

 

Key Highlights

 

•⁠  ⁠Ethical AI Framework: The RBI is crafting a framework to steer the ethical integration of AI throughout the financial landscape, emphasizing transparency, accountability, and the protection of customers. This initiative is designed to ensure that innovations driven by AI benefit the public while reducing risks like bias, data breaches, and operational weaknesses.

 

•⁠  ⁠Expert-Led Committee: In December 2024, the RBI formed the FREE-AI committee, led by Dr. Pushpak Bhattacharyya from IIT Bombay, comprising experts from government, academia, and industry. This committee's role is to assess the current state of AI adoption, review best practices from around the world, and suggest strong governance models.

 

•⁠  ⁠Operational Integration: The RBI is already incorporating AI into its essential functions, including fraud detection, customer complaint resolution, internal audits, and policy development. Tools such as ChiRAG (a generative AI platform) and MuleHunter.ai are being utilized to boost regulatory oversight and improve operational efficiency.

 

•⁠  ⁠Industry-Wide Impact: This framework will be applicable to all regulated entities, ensuring a unified approach to AI adoption. It will also tackle cybersecurity threats and help build trust in digital financial services.

 

•⁠  ⁠Global Engagement: The RBI is actively participating in international conversations about AI regulation, sharing insights and learning from global counterparts to enhance India’s financial stability and leadership in innovation.

 

Outlook

 

With the launch of its ethical AI framework, the RBI is setting the stage for India to become a frontrunner in responsible digital transformation. This initiative aims to strike a balance between swift technological advancement and strong safeguards, ultimately fostering trust and resilience in the financial sector.

 

 Source: Economic Times, FinTechBizNews, Daily Pioneer