RBI panel submits report on framework for AI use to foster innovation and mitigate risks in financial sector
Aug 13, 2025
Synopsis
The Reserve Bank of India has introduced a framework for the responsible and ethical integration of Artificial Intelligence in the financial sector. Anchored by seven core principles, the framework includes twenty-six recommendations across six strategic pillars. This initiative follows surveys and stakeholder consultations aimed at understanding AI adoption and challenges within the financial industry.
As Artificial Intelligence enters everyday life, the Reserve Bank of India's panel on Wednesday submitted its report on framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) in the financial sector.
"The framework is anchored in seven sutras which serve as the foundational principles and is operationalised through twenty-six targeted recommendations under six strategic pillars," said RBI in its document.
"In order to encourage the responsible and ethical adoption of AI in the financial sector, the FREE-AI Committee was constituted by the Reserve Bank of India. The RBI conducted two surveys to understand current AI adoption and challenges in the financial sector. The Committee referenced these surveys and, in addition, undertook extensive stakeholder consultations to gain further insights," said the RBI panel's document.
The Committee formulated 7 Sutras that represent the core principles to guide AI adoption in the financial sector. These are:
(i) Trust is the Foundation
(ii) People First
(iii) Innovation over Restraint
(iv) Fairness and Equity
(v) Accountability
(vi) Understandable by Design
(vii) Safety, Resilience and Sustainability
According to the report, 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.
Jurisdictions have adopted different approaches to AI policy and regulation based on their national priorities and institutional readiness.
In the financial sector, AI has the potential to unlock new forms of customer engagement, enable alternate approaches to credit assessment, risk monitoring, fraud detection, and offer new supervisory tools.
"At the same time, increased adoption of AI could lead to new risks like bias and lack of explainability, as well as amplifying existing challenges to data protection, cybersecurity, among others," the report said.
The seven Sutras formulated by the panel are: trust is the foundation; people first; innovation over restraint; fairness and equity; accountability; understandable by design; and safety, resilience and sustainability.
To foster innovation, the panel has also made several recommendations, including establishment of shared infrastructure to democratise access to data and compute, creation of an AI Innovation Sandbox, and development of indigenous financial sector-specific AI models.
[The Economic Times]
