RBI extends UPI credit line linking to Small Finance Banks, introduces an AI ethics framework, and launches AI-driven fraud detection to strengthen the financial system.
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The Reserve Bank of India (RBI) has introduced several key measures to enhance the financial ecosystem, focusing on the integration of advanced technologies and the expansion of payment systems. Governor Shaktikanta Das, during the monetary policy announcement on Friday, outlined these initiatives, which include the linking of pre-sanctioned credit lines to the Unified Payments Interface (UPI) for Small Finance Banks (SFBs).
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This development builds upon a feature launched in September 2023, which allowed Scheduled Commercial Banks (excluding Payment Banks and SFBs) to link pre-approved credit lines with UPI. By extending this facility to SFBs, the RBI aims to provide last-mile customers, particularly those new to credit, with better access to low-ticket and short-term credit products. SFBs, known for their technology-driven and cost-effective operations, are expected to play a pivotal role in reaching underserved sections of the population. Operational guidelines for implementing this initiative will be released soon, ANI reports.
Responsible AI framework announced
As per ANI, the RBI also revealed plans to establish a Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) within the financial sector. Recognising the immense potential of Artificial Intelligence (AI) and Machine Learning (ML) technologies in improving operational efficiency and decision-making, the RBI stressed the importance of mitigating associated risks, such as data privacy issues and algorithmic biases.
A dedicated committee, comprising experts from various domains, will be formed to design an ethical and adaptable framework to guide the use of AI in financial services. Details regarding the composition and scope of this committee will be disclosed in due course.
Tackling digital fraud with AI-powered initiatives
In a further effort to enhance cybersecurity, the RBI announced the development of MuleHunter.AITM, an AI/ML-driven model designed to identify mule bank accounts involved in fraudulent activities. Developed by the Reserve Bank Innovation Hub (RBIH), this pilot project has shown promising results in trials conducted with two major public sector banks.
The initiative aligns with the RBI's hackathon, "Zero Financial Frauds," which aims to develop innovative solutions to combat digital fraud. Banks have been encouraged to collaborate with RBIH to refine and expand the MuleHunter.AITM project, reinforcing the RBI's commitment to safeguarding the financial system from emerging threats.
These announcements mark a significant step in the RBI's efforts to harness cutting-edge technologies for enhancing financial inclusion, combating fraud, and ensuring the ethical use of AI in the financial sector, ANI reports.
(With inputs from ANI)
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