Experts favor RBI’s free-AI committee report

Mumbai, Aug 22

India's financial industry is at central with the introduction of the RBI's Free-AI framework. If innovation is handled carefully, artificial intelligence (AI) has the potential to be the means to increased financial inclusion, improved fraud detection, and increased consumer trust among Indians.

The Reserve Bank of India, through its Framework for Regulating Emerging and Explainable AI (FREE-AI), made several critical announcements aimed at ensuring the safe and responsible adoption of artificial intelligence in the financial sector. The report underscored the creation of a regulatory sandbox for AI-driven financial innovations, allowing banks and fintechs to test AI solutions under controlled environments. It mandated that all AI systems deployed in financial services must adhere to principles of fairness, transparency, accountability, and explainability, ensuring consumer protection and trust. Importantly, RBI proposed the establishment of a central AI governance council to oversee sector-wide AI use, monitor systemic risks, and standardize ethical guidelines. The framework also called for mandatory audit trails for high-risk AI models, sector-specific AI risk assessments, and stronger data privacy safeguards to align with India’s upcoming Digital Personal Data Protection regime. Collectively, these announcements signal RBI’s intent to balance innovation with regulatory oversight, positioning India as a responsible leader in AI-driven finance.

Talking to Bizz Buzz, Dnyanesh Pandit, managing director, financial services, Protiviti Member Firm for India says, “Our own AI Pulse Survey shows just 8 per cent of organizations globally have achieved true AI-powered transformation, yet 85 per cent already see strong returns.”

India has the opportunity to leapfrog by embedding responsible, explainable, and indigenous AI models into its financial fabric, turning inclusion and trust into lasting competitive advantage.

AI adoption is no longer optional for financial institutions; it is both a competitive necessity and a systemic safeguard.

Vaibhav Koul, managing director, cyber security, privacy and incident response, Protiviti Member Firm for India says, “Similar to our global finding that roughly 30 per cent of enterprises have the most difficulty integrating AI into legacy systems, the RBI analysis emphasis that smaller players face financial, data, and capacity hurdles.”

The path forward is obvious: board-level control, regulatory sandboxes, and shared infrastructure that enable AI to be safe and scalable. When innovation and resilience are treated as complementary forces, India can set a global benchmark for trustworthy AI in finance.

EoM.