Ethical Use of Artificial Intelligence in Financial Services to Be Overseen by RBI Panel

In order to establish guidelines for the ethical and responsible application of AI in the banking and financial industries, the Reserve Bank of India (RBI) has established a committee. In addition to outlining a plan for the long-term integration of AI, the group is responsible for tackling pressing issues including algorithmic bias, data privacy, and the explainability of decisions. According to RBI governor Shaktikanta Das, who spoke after the Monetary Policy Committee meeting, technologies such as cloud computing, artificial intelligence, and tokenisation are fast changing the banking system.

A group of specialists from many domains will be formed to ensure that these technologies are used to their full potential while minimising dangers like algorithmic bias, lack of transparency, and privacy of personal information. He also mentioned that this group will be recommending a framework for the ethical and responsible implementation of artificial intelligence (FREE-AI) in the banking industry.

Robust, Comprehensive, and Adaptable Framework

To meet the specific demands of the financial industry, the proposed committee—which would consist of experts from a range of fields—strives to provide a framework that is strong, thorough, and flexible. Addressing dangers associated with AI should be prioritised through early intervention, according to the RBI. The benefits of AI are undeniable, but the risks, such as algorithmic bias, data privacy problems, and choices that are difficult to justify, are just as great. It is crucial to handle these risks at the early phases of adoption, according to the central bank, in order to fully reap the benefits. Governor Das has already brought attention to the concerns associated with AI, such as the increased likelihood of cyberattacks and data breaches.

Another thing he brought up was how difficult it is to audit and understand the algorithms that support financial decisions due to the opaque nature of AI systems. Along with this statement, the Reserve Bank of India (RBI) also introduced a model dubbed MuleHunter that is powered by artificial intelligence and machine learning. Artificial intelligence (AI) to identify mule bank accounts, which enables small financing banks (SFBs) to provide pre-approved credit lines through the Unified Payments Interface (UPI), among other things.

RBI will Introduce Podcasts

In addition, Das announced that the RBI will be launching podcasts to reach a wider audience as part of its outreach efforts. Cyber fraud cost Indians up to 11,333 crore rupees in the first nine months of 2024, according to official statistics. In particular, during the first half of the current fiscal year 2024-25 (FY25), there were 6.32 lakh instances of UPI fraud totalling INR 485 cr.

The Reserve Bank has improved its communication skills and toolbox throughout the years to increase openness and strengthen ties with the public. During the meeting of the monetary policy committee (MPC), Governor Shaktikanta Das stated that the bank is planning to expand its communication tools to include "podcasts" in order to reach a wider audience with its information. Publishing informational pamphlets in regional languages is one of the many new ways the central bank is reaching out. This change is a component of RBI's larger plan to increase openness and participation from the public. The Santali language pamphlets were issued in November by the central bank with the goal of promoting financial literacy across various demographics, such as students, farmers, entrepreneurs, and the elderly. 

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