AI Revolution In Finance: Boon Or Bane? NASSCOM's Top Voice Decodes RBI's AI Panel Move | EXCLUSIVE

Recently the Reserve Bank of India ( RBI ) has announced its decision to set up an 8-member panel to develop an ethical approach towards AI in the financial sector.

The announcement was first made on Decemebr 6, 2024 and the panel will be called the Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI).

The committee will reportedly be led by Pushpak Bhattacharyya who is a Professor at the Department of Computer Science and Engineering, IIT Bombay as Chairman.

What Is The Objective Of The Panel?

The panel has been created to asses the current level of adoption of AI in the financial services sector, globally and in India. The panel will also review regulatory and supervisory approaches on AI, in the financial sector globally and identify potential risks and vulnerabilities associated with AI. Additionally, the panel will also recommend an evaluation, mitigation and monitoring framework and consequent compliance requirements of financial institutions like banks, non-banking finance companies (NBFCs), fintechs, etc.

Here Lies The Problem With Using AI Without Regulating It

While there have been several positive use cases of artificial intelligence (AI) in the financial sector, such as driving insights for data analytics, performance mapping, prediction as well as forecasting, real-time calculations, and customer servicing among others, there is still enough contention among major stakeholders in the industry about adoption of AI as it can make the sector prone to several risks.

AI: Boon Or Bane For The Financial Services Sector?

Senior Vice President of NASSCOM, Sangeeta Gupta in an exclusive interview told Republic Business that while unregulated use of artificial intelligence can be a problem for the financial services sector, it can also provide the solution for several problems.

As an example Sangeeta Gupta cited the issue of mule accounts that the sector faces. According to her, artificial intelligence can be used to find and identify mule accounts.

There are several other good use cases of AI in the banking sector, "especially in customer solution and management solutions," she said.

She also said that while using artificial intelligence can be beneficial to the sector, the unregulated use of generative AI (GenAI) could pose certain issues, adding that GenAI poses risks of deepfake as well as bias in the data, which could then lead to issues like loans getting denied.

Sangeeta Gupta also emphasised on the need for ethical solutions around the same.

NASSCOM itself has published guidelines on responsible use of GenAI, she added.

"While AI can create problems for the sector, you can also use it to create solutions," she said.

On being asked what potential the panel has and can create for the ethical use of AI in the financial services sector, she said, "the RBI is already taking a sandbox approach in implemting AI, so solutions can be beta tested," adding that there is a need for the panel to consider more domain centric applications.

(With PTI inputs)