RBI committee to study global regulations on AI, identify risks | Mint

Mumbai: India’s banking regulator has set up an eight-member committee to study regulatory and supervisory approach on artificial intelligence, especially in the financial sector, in other parts of the world and identify its potential risks.

The panel will recommend an evaluation, mitigation and monitoring framework and compliance requirements related to AI for financial institutions, including banks, non-banking financial services companies (NBFCs), fintechs, and payment system operators (PSOs), among others, the Reserve Bank of India said on Thursday.

It will also look to “recommend a framework including governance aspects for responsible, ethical adoption of AI models/applications in the Indian financial sector”. The panel has to submit its report within six months of the date of its first meeting.

Growing concerns on AI

The committee reflects growing concerns about risk that AI poses to the financial sector grows. Mint reported on Thursday that State Bank of India, Bank of Baroda, HDFC Bank, Axis Bank and Poonawalla Fincorp are among lenders developing specific use cases to adopt AI to enhance business.

The committee was first announced on 6 December. Citing “rapid transformation” of the financial sector by technologies such as AI, tokenization and cloud computing, then governor Shaktikanta Das had said the panel of experts from diverse fields will look at how harness their benefits, while addressing risks such as algorithmic bias, explainability, data privacy.

The eight-member panel will be chaired by Pushpak Bhattacharyya, professor, department of computer science and engineering, IIT Bombay. Other members are Debjani Ghosh, distinguished fellow, NITI Aayog; Balaraman Ravindran, professor and head, Wadhwani School of Data Science and AI, IIT Madras; and Abhishek Singh, additional secretary, ministry of electronics and information technology.

Rahul Matthan, partner, Trilegal; Anjani Rathor, group head and chief digital experience officer, HDFC Bank; Sree Hari Nagaralu, head of security AI research, Microsoft India (R&D); and Suvendu Pati, chief general manager, fintech department, Reserve Bank of India, have also been included.

The banking regulator said on Thursday that its fintech department will provide secretarial support to the committee, which could also invite domain experts, industry representatives, RBI departments and other stakeholders.

This comes a few months after Das had raised concerns around financial stability risks arising out of AI usage. In a speech on 14 October, Das had said that heavy reliance on AI can lead to concentration risks, especially when a small number of tech providers dominate the market. This could amplify systemic risks, as failures or disruptions in these systems may cascade across the entire financial sector, he had said.

“Banks and other financial institutions must put in place adequate risk-mitigation measures against all these risks. In the ultimate analysis, banks have to ride on the advantages of AI and Bigtech and not allow the latter to ride on them,” he had said.