On 26 December 2024, the Reserve Bank of India (RBI) announced the formation of the Committee for the Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the financial sector. This initiative, introduced in the Developmental and Regulatory Policies Statement on 6 December 2024, aims to create a robust governance framework for the responsible and ethical adoption of artificial intelligence (AI) in India’s financial ecosystem. By combining innovative technologies with stringent oversight, the RBI intends to address the challenges posed by AI while ensuring customer protection and operational resilience.
The FREE-AI Committee will be chaired by Dr. Pushpak Bhattacharyya, Professor at IIT Bombay, and comprises distinguished experts from various fields including academia, government, technology, and finance. Notable members include Ms. Debjani Ghosh, a former president of NASSCOM and a Distinguished Fellow at NITI Aayog; Dr. Balaraman Ravindran, Head of the Wadhwani School of Data Science and AI at IIT Madras; and Shri Abhishek Singh, Additional Secretary in the Ministry of Electronics and Information Technology. The FinTech Department of the RBI will provide secretarial support to the committee, which will also engage domain experts, industry representatives, and other stakeholders as needed for consultations and deliberations.
The committee’s primary focus is to evaluate the current state of AI adoption in financial services, both globally and within India. This includes a review of regulatory and supervisory approaches that address the unique challenges AI presents in the financial sector. The committee will assess potential risks associated with AI, such as data security issues, model bias, and operational vulnerabilities, while recommending strategies for their mitigation and monitoring. These efforts are aimed at building a framework that enables financial institutions, including banks, NBFCs, FinTechs, and payment service operators, to adopt AI responsibly and ethically.
One of the responsibilities of the committee is to design a governance model that ensures transparency, accountability, and compliance in AI adoption. The RBI has mandated the committee to propose a framework that aligns with ethical principles and regulatory standards, safeguarding the interests of all stakeholders in the financial sector. The framework will also address broader issues such as customer trust, operational resilience, and the long-term sustainability of AI-driven financial services.
The inclusion of experts from diverse fields ensures a comprehensive approach to addressing the complex challenges posed by AI. The committee’s work will play a crucial role in shaping policies that balance the potential benefits of AI with the imperative of mitigating associated risks. The committee has been tasked with delivering its final report within six months from its first meeting, expected in mid 2025. The outcomes of this initiative are anticipated to set the foundation for India’s leadership in responsible AI innovation, ensuring a harmonious blend of technological progress and ethical integrity.
(Source: https://fintech.rbi.org.in/FS_PressRelease?prid=59377&fn=2765, https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR1779498546366D904B94B98C69FCA9EF2411.PDF)
