In Focus by The Hindu Can RBI's new guidelines regulate the use of AI, without slowing down innovation?
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Aug 27, 2025 Prasanna Tantri, an Associate Professor of Finance and Executive Director at the Centre for Analytical Finance, delves into the impact of AI on India's banking sector. He discusses the Reserve Bank of India's guidelines for ethical AI use, focusing on mitigating risks like bias. The conversation covers AI's role in fraud detection and credit scoring, the necessity of human judgment, and the challenges of data consent. Tantri also highlights the need for innovation alongside regulatory frameworks to balance safety and progress in fintech.
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Where AI Actually Shows Up In Finance
- Prasanna Tantri describes many fintech uses in banks from one-minute loan decisions to robo-advisory and fraud detection.
- He says AI is present across processes but hasn't replaced human judgment in core lending decisions.
Algorithms Can Recreate Past Crises
- Overreliance on algorithms can replicate past financial mistakes because models hide flawed assumptions.
- Tantri warns algorithmic lending can create systemic risks reminiscent of pre-2008 math-driven finance errors.
India's Mini Fintech Crisis
- Tantri recounts India's recent fintech-driven unsecured credit surge where many startups failed after VC-fueled expansion.
- He calls this a 'mini version' of a crisis driven by poor algorithms and selective-labels problems.