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FREE-AI
Context: The Reserve Bank of India (RBI) has introduced the Framework for Responsible and Ethical Enablement of AI (FREE-AI) to guide the financial sector in adopting Artificial Intelligence (AI) while managing risks.
What is FREE-AI?
FREE-AI is an RBI-backed framework to promote responsible AI adoption in India’s financial sector. It focuses on:
- Ethical AI Deployment: Ensuring fairness, transparency, and accountability.
- Risk Mitigation: Addressing cybersecurity, bias, and data privacy concerns.
- Innovation Boost: Encouraging AI-driven solutions in banking, insurance, and fintech.
- Objective: To create a secure, inclusive, and efficient financial system powered by AI.
What are the Benefits of AI in India’s Financial Sector?
- Fraud Detection: Real-time monitoring of transactions (e.g., UPI fraud prevention).
- Credit Scoring: AI analyses non-traditional data (e.g., e-commerce history) for loans.
- Customer Service: Chatbots (like HDFC’s EVA) reduce operational costs.
- Risk Management: Predictive analytics for NPAs and market trends.
- Financial Inclusion: AI-driven micro-lending for underserved regions.
What are the Major Challenges?
- Data Privacy: Risk of misuse under India’s Digital Personal Data Protection Act, 2023.
- Algorithmic Bias: AI may discriminate based on gender/region.
- Cybersecurity Risks: AI systems vulnerable to hacking.
- Skill Gap: Shortage of AI-trained professionals in finance.
- Regulatory Lag: Fast-evolving AI may outpace policies.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
