RBI deputy governor Rajeshwar Rao has raised concerns over issue relating to fairness, transparency and governance in the use of artificial intelligence in banking.

Speaking at at the 106th annual conference of Indian Economic Association in Delhi recenty, Rao said that despite the transformative potential of GenAI, there are potential impacts on productivity, jobs, and income distribution. While proponents expect widespread economic and societal benefits, sceptics point to concerns such as increased unemployment and challenges in resource reallocation during the transition.

Rao outlined specific concerns and expectations for financial institutions deploying AI in their processes and decision-making. These include biases, robustness issues, data privacy, cybersecurity, consumer protection, and maintaining financial stability. He added that AI inherits biases and errors from its training data, making regular fairness audits essential. He highlighted the challenge of AI models being black boxes, making them difficult to decode for audit and supervisory reviews.

“AI may also pose some novel challenges for governance, especially where the technology is used to facilitate autonomous decision-making and may limit or even potentially eliminate human judgement and oversight,” said Rao. He outlined ten aspects for financial institutions deploying AI models, aiming to balance innovation and responsible technology use. These include fairness, transparency, accuracy, consistency, data privacy, explainability, accountability, robustness, monitoring, updating, and human oversight.

He emphasised that incorporating these aspects would foster public trust and ensure responsible AI deployment, calling for a supportive regulatory framework and global cooperation in such frameworks for guiding AI applications.