RBI Panel Proposes 26-Point Framework to Build AI in Financial Sector with Strong Risk Safeguards

A Reserve Bank of India (RBI) committee on Wednesday submitted a comprehensive report setting out a framework to develop AI capabilities across the country’s financial sector, while also proposing safeguards to manage the technology’s risks.

The report contains 26 actionable recommendations grouped under six strategic pillars, infrastructure, capacity, policy, governance, protection and assurance.

The committee, chaired by IIT-Bombay computer scientist Pushpak Bhattacharyya, anchored its proposals in seven core principles, or “sutras,” including “Trust is the Foundation,” “People First,” “Innovation over Restraint,” “Fairness and Equity,” “Accountability,” “Understandable by Design” and “Safety, Resilience and Sustainability.” The sutras are intended to balance a forward-looking push for innovation with parallel risk mitigation.

Build Local Capabilities

Central to the panel’s innovation agenda is a recommendation to create shared digital infrastructure, a digital public infrastructure for the financial sector, to democratise access to high-quality data and compute for home-grown models. The group also urged establishment of an AI Innovation Sandbox to accelerate testing and an incentives fund to spur development of indigenous financial-sector AI models.

These measures are pitched as ways to reduce dependence on external models and tailor AI to India’s regulatory and market needs.

To manage risks, the committee recommended that regulated entities adopt board-approved AI policies and implement a risk-based AI audit framework covering the lifecycle of AI systems, from data inputs and model design to decision outputs and post-deployment monitoring. The report also calls for strengthened consumer-protection measures, expanded product-approval processes for higher-risk AI use cases, and tighter cyber-security and incident-reporting norms.

Integration with Digital Public Platforms

The panel proposed issuing an enabling framework to integrate AI capabilities with existing digital public infrastructure such as the Unified Payments Interface (UPI) and other national platforms, where appropriate. That step is aimed at unlocking use cases while ensuring interoperability and consistent governance across public and private systems.

The committee framed its recommendations under the motto that fostering innovation should be “in harmony, and not at odds, with mitigation of risk.”

Regulators, boards and industry players are now expected to translate the 26 recommendations into supervisory guidance, implementation timetables and capacity-building programmes, with the RBI posting the committee’s report on its website for wider consultation and follow-up.