India Seeks to Expand AI Regulatory Prospects! RBI Comes to the Rescue

RBI shortlists AI consultancy firms as India seeks to expand AI regulatory prospects

India seeks to expand its AI Regulatory Prospects therefore the Reserve Bank of India offers its assistance and has picked seven international consulting firms to perform supervisory tasks using Artificial Intelligence (AI) and machine learning(ML) to make sure that the Department of Supervision at the central bank can benefit from these modern analytics.

ML and AI are already being used in supervisory procedures by RBI. It now intends to make sure that the Department of Supervision at the central bank may reap the rewards of advanced analytics. Additionally, they have plans to bring in outside consultants for this work. For supervisory tests, the department has been creating and utilizing linear and a few ML models. Urban cooperative banks (UCBs), non-bank financial businesses (NBFCs), payment banks, small financing banks, neighbourhood banks, credit information firms, and a few more Indian financial organizations are all subject to the RBI's regulatory authority. 

The Current Challenges to AI Traction in India: 

Although there was initially a lot of enthusiasm for AI, several experts felt that there was untapped potential and that the nation might be doing much more to adopt and incorporate

AI technologies. The cost of failure being significantly higher in India than it is in the West, according to cultural comparisons, was another recurring theme during our interviews. While losing in the face of daring innovation and lofty aspirations may be viewed as heroic or honourable in Silicon Valley, New York City, or even Boston, failure frequently connotes a loss of face in Asia. This has always meant that there hasn't been much room for creative improvisation.

RBI intents to use AI and ML rigorously: 

AI and ML technologies are utilized for real-time data reporting, efficient data management, and data distribution on the data gathering side. Monitoring supervised firm-specific risks, including liquidity risks, market risks, credit exposure and concentration risks, misconduct analysis, and product misspelling, is done through data analytics. To hire consultants with experience using advanced analytics, AI, and machine learning to produce supervisory inputs, the central bank has put out a call for Expressions of interest (EoI). The chosen consultants will be asked, among other things, to investigate and profile data with a supervisory focus.

The EoI stated that the goal is to improve the Reserve Bank's data-driven surveillance capabilities. Machine learning techniques, often known as "Supertech" and "regtech," are being used by regulatory and supervisory organizations all across the world to support their work. Although the majority of these methods are still in the exploratory stage, they are fast expanding in scope and popularity.

RBI jurisdiction –

• Banks, urban cooperative banks, non-bank financial businesses (NBFCs), payment banks, small financing banks, local area banks, credit information firms, and a few other Indian financial organizations are all subject to the RBI's regulatory authority.

• To safeguard the interests of depositors and maintain financial stability, it conducts supervision of these companies intending to evaluate their soundness, solvency, asset quality, governance structure, liquidity, and operational viability.

• According to the EoI, the RBI conducts ongoing oversight of SEs through on-site inspections and remote surveillance.

RBI shortlists AI consultancy firms: 

According to an RBI document, the central bank has chosen seven candidates to take part in the request for proposal (RFP) process for choosing the consultant(s) based on the examination/evaluation detailed in the EOI document. The seven firms are as follows:

1. Accenture Solutions Private Limited

2. Boston Consulting Group (India) Pvt Ltd

3. Deloitte Touche Tohmatsu India LLP

4. Ernst and Young LLP

5. KPMG Assurance and Consulting Services LLP

6. McKinsey and Company

7. Pricewaterhouse Coopers Pvt Ltd.

Conclusion: 

While the RBI already employs AI and ML in supervisory procedures, it now plans to build it up so that the Department of Supervision at the central bank may gain from sophisticated analytics. The Department of Supervision has been developing and using linear and a few machine-learned models for supervisory examinations.