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Informist, Wednesday, Aug. 13, 2025

NEW DELHI – A committee set up by the Reserve Bank of India has suggested that regulated entities establish board-approved artificial intelligence policies to ensure safe adoption of AI within the financial sector. The eight-member committee has outlined 26 recommendations in its report for the responsible and ethical use of AI in the financial sector. 

The panel recommended formulation of an AI policy to provide necessary regulatory guidance, establishment of shared infrastructure to ease access to data and the creation of an AI Innovation Sandbox, according to the report released by the RBI Wednesday. The panel also suggested the development of indigenous financial sector-specific AI models.

"Regulators should periodically undertake an assessment of existing policies and legal frameworks to ensure they effectively enable the AI-driven innovations and address the AI-specific risks," the panel said. "The RBI may consider issuing consolidated AI Guidance to serve as a single point of reference for regulated entities and the broader FinTech ecosystem on the responsible design, development, and deployment of AI solutions."

The panel suggested that the RBI may consider allocating a fund to set up data infrastructure to support innovation. A framework should also be established to integrate AI with India's digital public infrastructure to accelerate the delivery of inclusive and affordable financial services. Indigenous AI models tailored for the Indian financial sector should be developed and offered as a public good, the panel said in its report. 

The committee has recommended that regulators adopt a graded liability framework to hold entities liable for any loss suffered by customers. At the same time, regulators should adopt an accommodative supervisory approach in cases where entities followed appropriate safety mechanisms, the panel said. "This tolerant supervisory stance should be limited to first-time/one-off aberrations and denied in the event of repeated breaches, gross negligence, or failure to remediate identified issues."

A permanent multi-stakeholder AI standing committee should be constituted under the RBI for an initial period of five years to advise the central bank on emerging opportunities and risks from AI technology, the panel said. "A dedicated institution should be established for the financial sector, operating under a hub-and-spoke model to the national-level AI Safety Institute, for continuous monitoring and sectoral coordination."

Regulated entities must establish robust data governance frameworks, AI system governance frameworks, and board-approved consumer protection frameworks, the panel said. Entities must identify potential security risks on account of their use of AI and strengthen their cybersecurity ecosystems to address them, it added.

The panel has formulated seven principles to guide AI adoption in India's financial sector. These principles include "trust is the foundation", "innovation over restraint", and accountability.  End

Reported by Shubham Rana

Edited by Saji George Titus

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