RBI Governor pitches for developing trustworthy AI

Mumbai, Aug 28: Central banks, governments as well as financial sector players should facilitate the development of "trustworthy AI" by taking into consideration data privacy concern and other elements, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Wednesday.

The integration of cutting-edge technologies promises transformative advancements across various facets of our life, Das said while addressing the Global Fintech Fest here.

"Artificial Intelligence and Machine Learning (AI/ML) are poised to revolutionise financial services in unprecedented ways. AI algorithms are already being deployed for fraud detection. Machine learning models are increasingly being employed in credit scoring, leveraging predictive analytics to assess creditworthiness, and expand access to credit," he said.

As AI and ML capabilities continue to evolve, their potential applications in regulatory compliance, investment advisory services, and algorithmic trading are expected to further redefine the financial landscape, he said.

Simultaneously, he said, "we should also fully understand the risks posed by AI and facilitate calibrated and responsible adoption. Players in the financial sector, central banks and governments should facilitate the development of trustworthy AI, keeping in mind the concerns surrounding data privacy, explainability, accountability and transparency".

Moreover, he said, quantum computing's potential to solve optimisation problems could enhance real-time decision-making processes and improve predictive analytics in risk management.

The Internet of Things (IoT) represents another frontier of opportunity for the financial sector, he said.

As these future technologies continue to evolve, their integration into India's financial ecosystem will require strategic investments in research and development, collaboration across sectors, and proactive regulatory frameworks to ensure ethical deployment and mitigation of potential risks, he said.

The Reserve Bank is fully conscious of all these issues and giving due attention to these areas, he said.

Observing despite their benefits, green bond and green deposit frameworks face several challenges, he said they include scalability, as the market for green bonds needs to expand significantly to attract larger issuances and diverse set of investors.

Ensuring authenticity and impact of green projects, financed through these frameworks, requires robust monitoring and reporting mechanisms, he said.

Technology can play a pivotal role in overcoming these challenges, he said, adding that blockchain technology, for instance, can enhance transparency and traceability in green bond issuances and provide immutable records of project impact.