Policy considerations in the use of artificial intelligence (ai) in India: A case for the financial sector
By: Chawla, Rohit and Banka, Abhinav
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Material type: 
BookPublisher: ISTM Journal of Training Research and Governance Description: 5(2), Jan, 2025: p.89-100.Subject(s): Artificial intelligence (AI), Emerging risks, Financial stability, Governance, Regulations
In:
ISTM Journal of Training Research and GovernanceSummary: The use of Artificial Intelligence (AI) is multiplying rapidly in the financial sector across the globe. Financial services are well poised to take advantage of recent advances in AI given the industry’s long-standing focus on improving regulation and supervision using databacked mechanisms. However, parallelly there are new tail risks emanating from the use of AI, which merits attention. Further complexities could arise with Generative AI given its linkages to numerous black boxes. This paper assesses the policy considerations for the use of AI in the Indian financial sector, especially from the financial stability perspective. Using cross-country analysis, the paper tries to bring forward major issues faced by regulators/policymakers in developing the AI regulation framework. Building upon key attributes of accountability, explainability, governance and usability, the paper highlights important policy considerations for the responsible use of AI in the financial sector. The agenda paper is structured as follows: Section 1outlines use cases and benefits of AI in the financial sector, Section 2 lists out emerging risks from AI in finance, Section 3 brings cross country approaches to AI regulations, Section 4 deals with India’s AI preparedness, Section5 outlines policy considerations and important questions for discussions. National Association of Software and Service Companies (“NASSCOM”) surveyed 500 companies in India in 2021 and 2022 to study the rate of adoption of AI across various sectors in its AI Adoption Index Reports (NASSCCOM, 2022). As per this report, the AI adoption in India has increased by 14 percent since 2021, where 70 percent of the enterprises are allocating more than 20 percent of their Information Technology budget to it. While there are specific AI applications incorporated in different sectors, there are general use cases that are deployed across various sectors as chat bots, optical character recognition, text mining, and sentiment analysis. Different AI models can be applied to different use cases, depending on the task at hand and the limitations of any given model. While developments under AI are multiplying at an advanced rate, the major innovation has been led by Generative artificial intelligence (GenAI). The areas under the financial sector where AI technology can be constructively used include REGTECH & SUPTECH, Portfolio Management, Capital Optimization, Climate Risk Assessment using assessment of 1.0. Artificial Intelligence Adoption in The Indian Financial Sector
https://www.istm.gov.in/home/istm_journal/3
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 5(2), Jan, 2025: p.89-100 | Available | AR137315 |
The use of Artificial Intelligence (AI) is multiplying rapidly in the financial sector across the globe. Financial services are well poised to take advantage of recent advances in AI given the industry’s long-standing focus on improving regulation and supervision using databacked mechanisms. However, parallelly there are new tail risks emanating from the use of AI, which merits attention. Further complexities could arise with Generative AI given its linkages to numerous black boxes. This paper assesses the policy considerations for the use of AI in the Indian financial sector, especially from the financial stability perspective. Using cross-country analysis, the paper tries to bring forward major issues faced by regulators/policymakers in developing the AI regulation framework. Building upon key attributes of accountability, explainability, governance and usability, the paper highlights important policy considerations for the responsible use of AI in the financial sector. The agenda paper is structured as follows: Section 1outlines use cases and benefits of AI in the financial sector, Section 2 lists out emerging risks from AI in finance, Section 3 brings cross country approaches to AI regulations, Section 4 deals with India’s AI preparedness, Section5 outlines policy considerations and important questions for discussions. National Association of Software and Service Companies (“NASSCOM”) surveyed 500 companies in India in 2021 and 2022 to study the rate of adoption of AI across various sectors in its AI Adoption Index Reports (NASSCCOM, 2022). As per this report, the AI adoption in India has increased by 14 percent since 2021, where 70 percent of the enterprises are allocating more than 20 percent of their Information Technology budget to it. While there are specific AI applications incorporated in different sectors, there are general use cases that are deployed across various sectors as chat bots, optical character recognition, text mining, and sentiment analysis. Different AI models can be applied to different use cases, depending on the task at hand and the limitations of any given model. While developments under AI are multiplying at an advanced rate, the major innovation has been led by Generative artificial intelligence (GenAI). The areas under the financial sector where AI technology can be constructively used include REGTECH & SUPTECH, Portfolio Management, Capital Optimization, Climate Risk Assessment using assessment of 1.0. Artificial Intelligence Adoption in The Indian Financial Sector
https://www.istm.gov.in/home/istm_journal/3
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