A committee set up by the Reserve Bank of India (RBI) to develop a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the financial sector has recommended the establishment of shared infrastructure by regulated entities (REs) to democratise access to data and compute, and for the creation of an Al Innovation Sandbox.
On Wednesday, the panel submitted its report, which has been uploaded on the RBI website. The report sets a framework to guide on the use of AI in the financial sector, aiming to harness its potential while safeguarding against associated risks.
The committee has developed 7 sutras to serve as the foundational principles for AI adoption. Guided by the 7 sutras, the committee has recommended a forward-looking approach, containing 26 actionable recommendations under six strategic pillars. The report envisions a financial ecosystem where encouraging innovation is in harmony, and not at odds, with mitigation of risk, the RBI said.
The 7 sutras include Trust is the Foundation, People First, Innovation over Restraint, Fairness and Equity, Accountability, Understandable by Design and Safety, Resilience and Sustainability.
Using the sutras as guidance, the committee has recommended an approach that fosters innovation and mitigates risks, treating these two seemingly competing objectives as complementary forces that must be pursued in tandem. This is achieved through a unified vision spread across 6 strategic Pillars that address the dimensions of innovation enablement as well as risk mitigation.
Under innovation enablement, the focus is on Infrastructure, Policy and Capacity and for risk mitigation, the focus is on Governance, Protection and Assurance. Under these six pillars, the report outlines 26 recommendations for Al adoption in the financial sector.
To foster innovation, the panel has recommended the establishment of shared infrastructure to democratise access to data and compute; the creation of an Al Innovation Sandbox and the development of indigenous financial sector-specific Al models.
It has also recommended for the formulation of an Al policy to provide necessary regulatory guidance, institutional capacity building at all levels, including the board and the workforce of REs and other stakeholders, the sharing of best practices and learnings across the financial sector and a more tolerant approach to compliance for low-risk Al solutions to facilitate inclusion and other priorities.
To mitigate Al risks, the committee has recommended for the formulation of a board-approved Al policy by Regulated Entities, the expansion of product approval processes, consumer protection frameworks and audits to include Al related aspects and the augmentation of cybersecurity practices and incident reporting frameworks.
Besides, it has prescribed the establishment of robust governance frameworks across the Al lifecycle and making consumers aware when they are dealing with Al. “This is the FREE-Al vision: a financial ecosystem where the encouragement of innovation is in harmony with the mitigation of risk,” the committee said in the report.
