RBI Establishes Expert Committee for Ethical AI Utilization in Finance
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Mumbai, Dec 6 (NationPress) The Reserve Bank of India (RBI) has resolved to form a committee tasked with developing a Framework for Responsible and Ethical Enablement of AI (FREE-AI) within the financial sector, as disclosed by RBI Governor Shaktikanta Das on Friday.
The FREE-AI committee will focus on establishing a framework that tackles significant challenges, such as algorithmic transparency and user data protection, while also creating a strategic roadmap for the sustainable integration of AI into the financial sector.
“To leverage the advantages of these technologies while managing the associated risks, including algorithmic bias, explainability, and data privacy, an expert committee from various fields will be assembled to propose a framework for the responsible and ethical use of AI,” Das commented following the RBI’s Monetary Policy Committee meeting.
The financial sector is undergoing substantial transformations with the emergence of cutting-edge technologies. Innovations such as Artificial Intelligence (AI), Machine Learning (ML), tokenization, and Cloud Computing possess the potential to revolutionize the financial landscape by managing vast amounts of data, automating complex tasks, improving decision-making processes, and creating unprecedented efficiencies.
“Despite the numerous benefits, there are significant risks involved, including algorithmic bias, the explainability of decisions, and data privacy. Addressing these risks early in the adoption process is essential to fully harness the advantages,” the RBI stated.
Earlier in August, the RBI had introduced a draft circular focused on managing model risks in credit to mitigate uncertainties associated with AI/ML-based credit assessment and risk management systems employed by digital lenders.
The Reserve Bank is actively collaborating with banks and other stakeholders to prevent and reduce digital fraud within the financial sector. This includes issuing guidelines to regulated entities aimed at bolstering cybersecurity, preventing cyber fraud, and enhancing transaction monitoring.
Fraudsters frequently utilize money mule accounts as a common scheme to funnel the proceeds of their fraudulent activities.
The Reserve Bank is also conducting a hackathon centered around the theme “Zero Financial Frauds,” which incorporates a specific challenge regarding mule accounts, in order to stimulate the creation of innovative solutions to combat the usage of these accounts.
