A Reserve Bank of India (RBI) committee has urged the creation of a dedicated framework to guide the use of artificial intelligence in the country’s financial sector, warning that innovation must advance alongside safeguards to limit potential risks.
According to Reuters, the eight-member committee, led by computer scientist Pushpak Bhattacharyya of IIT Bombay, released its findings on Wednesday. The report set out 26 recommendations across six broad areas: infrastructure, capacity, policy, governance, protection and assurance.
Among its key proposals, the committee advised building a digital infrastructure to support the development of indigenous AI models specifically designed for India’s financial services. It also called for a multi-stakeholder standing committee to continually assess both risks and opportunities associated with the deployment of AI in finance.
Another major recommendation was the establishment of a dedicated fund to incentivise the creation of homegrown AI solutions. The committee argued such a fund would encourage the development of models tailored to the country’s financial ecosystem, rather than relying solely on imported technology.
The report also highlighted the importance of regulatory alignment, suggesting an enabling framework to allow AI integration into India’s existing digital public platforms, including the Unified Payments Interface (UPI). Audit frameworks would also need to be developed to ensure responsible oversight of AI-driven systems.
“The report envisions a financial ecosystem where encouraging innovation is in harmony, and not at odds, with mitigation of risk,” the RBI said in a statement.
The central bank first set up the group in December to design a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREEAI) for the financial sector. The recommendations are intended to ensure AI adoption in banking, insurance and payments does not outpace appropriate risk controls.
“The challenge with regulating AI is in striking the right balance, making sure that society stands to gain from what this technology has to offer, while mitigating its risks,” the report said.
If implemented, the recommendations could provide India’s financial system with a structured path to harness AI innovation, while maintaining confidence in the safety and integrity of digital finance.
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