Reserve Bank of India (RBI) introduces FREE-AI blueprint to regulate ethical AI in India’s financial sector, ensuring innovation while minimizing risks.

Committee Formation and Methodology

• Chaired by Dr. Pushpak Bhattacharyya, the committee includes members from policy, industry, and academia.
• Used stakeholder engagements, national surveys, global standards review, and gap analysis of existing RBI guidelines.

Opportunities with AI in Finance

• AI offers productivity gains, personalized customer experience, risk analytics, and financial inclusion.
• India’s diverse market requires multilingual and domain-tuned AI models for efficient operations.

Risk Landscape and Global Policies

• Identified model and operational risks like bias, data poisoning, and cybersecurity threats.
• India’s approach aligns with pro-innovation safeguards and focuses on trust, fairness, and accountability.

Core Principles and Strategic Pillars

• Core principles include Trust, People First, Innovation, Fairness, Accountability, Understandability, and Safety.
• Strategic pillars emphasize infrastructure, policy, capacity, governance, protection, and assurance.

RBI’s Recommendations and Implementation

• Twenty-six recommendations include shared data infrastructure, AI sandbox, and cybersecurity measures.
• Encourages board-approved AI policies, consumer disclosures, and incident reporting for transparent AI use.

Survey Insights and Current Adoption

• 20.8% of supervised entities use or develop AI with low governance maturity.
• Main use cases include customer support, credit underwriting, sales/marketing, and cybersecurity.

Integration with Existing RBI Rules and Future Steps

• Ensuring alignment with outsourcing, IT/cybersecurity, digital lending, and consumer protection guidelines.
• Focus on operationalizing the AI Sandbox, promoting inclusive models, and enhancing transparency in AI decisions.

Key Takeaways for Competitive Exams:

• RBI’s FREE-AI framework aims to balance innovation and risk control in the financial sector.
• The framework emphasizes trust, fairness, and accountability in AI adoption.
• India’s approach aligns with global policies while focusing on tailored solutions for the local market.
• The framework includes core principles, strategic pillars, and actionable recommendations for AI implementation.
• The report highlights the need for capacity building, governance, and protection measures to enhance AI adoption across financial institutions.