While the integration of AI into financial services brings significant opportunities for customers, banks and regulators, the cutting-edge technology also poses its own set of challenges such as data privacy concerns that arise from handling vast volumes of personal information and the potential of misuse to spread misinformation, RBI Governor Shaktikanta Das said here on Monday.
Speaking at the Global Conference on 'Digital Public Infrastructure and Emerging Technologies', Das said, “Today, Artificial Intelligence (AI) is making forays in the financial sector in the form of services like chatbots, internal data processing for intelligent alerts, fraud risk management, credit modelling and other processes. Integrating this cutting-edge technology into a robust and responsible DPI (digital public infrastructure) presents an opportunity to amplify the capabilities and efficiency of DPI even further.”
He pointed out that the Report of India’s G20 Task Force on DPI states that the seamless fusion of DPI with AI would propel us into a new world of 'Digital Public Intelligence'. Integration of AI into financial services brings significant opportunities for all stakeholders. For customers, AI enables hyper-personalised products and faster, more relevant services. Financial institutions like lenders benefit from advanced tools for risk and fraud management, streamlined operations, and reduced compliance costs. Regulators gain enhanced oversight and real-time monitoring capabilities, which would improve regulatory enforcement and market stability, the RBI Governor said.
However, such advancements come with serious challenges, he said, adding that data privacy concerns arise from handling vast volumes of personal information. Ethical AI governance is essential to ensure fairness and prevention of bias. Financial institutions must ensure that AI models are explainable, i.e., the ability to explain why certain results are produced. AI technology can also be misused to spread misinformation, potentially causing severe damage and disruption to DPIs as well as other digital systems. They can also damage the reputation and operations of financial institutions, Das said.
He observed that international bodies such as the Organisation for Economic Cooperation and Development (OECD) have recognised this problem and outlined core principles governing AI, which include inclusive growth, respect for the rule of law and human rights, transparency and explainability, robustness and safety, and accountability. In December 2023, the Hiroshima AI Process Comprehensive Policy Framework was established which includes a set of guiding principles and a code of conduct, marking a significant step towards a coordinated global approach for responsible development of AI, he added.
Das also highlighted that India is the lead chair of the Global Partnership on AI (GPAI) for 2024. This multi-stakeholder initiative, with 29 countries, aims to bridge the gap between AI theory and practice by supporting cutting-edge research and advancing applied activities. India’s Ministry of Electronics and Information Technology (MeitY) has been taking important initiatives in this area, such as setting up AI Research Analytics and Knowledge Dissemination Platform, which will focus on developing indigenous AI-enabled products and solutions to tackle India-specific challenges and complex real-life problems. These initiatives underscore India’s commitment to not only capitalise on the potentialities of AI technology but also ensure robust governance, Das added.
“It is important to be proactive to leverage the capabilities of new technologies, but at the same time it is essential to be abundantly mindful of the associated risks and challenges,” The RBI Governor said.
He emphasised that the authenticity of data being used in the AI models, the possibility of biases and concerns about data privacy need to be carefully examined.
Going beyond understanding the risks posed by AI, financial institutions should clearly outline the liabilities and ensure a calibrated and responsible adoption. The Central banks and governments, on their part, should foster the development of trustworthy AI, keeping data privacy, explainability, accountability and transparency at its core, the RBI Governor added.
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