RBI’s FREE-AI Framework: Balancing Innovation and Regulation in Financial Services

Smita Jha and Supratim Chakraborty discuss how RBI’s FREE-AI Framework is shaping the future of finance in India. As AI increasingly drives underwriting, credit scoring, fraud detection, process automation, customer support, risk management, and compliance, clear regulatory guidance has become essential. The framework lays out guiding principles, called Sutras, along with practical recommendations to ensure innovation proceeds with accountability and trust.

The conversation highlights the framework’s twin pillars, Innovation Enablement and Risk Mitigation, and their significance for financial institutions navigating an AI-driven landscape. Innovation Enablement focuses on building high-quality, interoperable financial-sector data infrastructure and AI sandboxes for safe testing, while Risk Mitigation emphasizes governance, board-approved AI policies, data lifecycle management, consumer protection, and transparent reporting.

Smita and Supratim also explore the convergence of finance and privacy. While AI enables efficiency and broader credit access, privacy safeguards are critical to prevent misuse of sensitive data. Embedding AI literacy, fostering a culture of governance, and proactively managing risks are essential to responsible adoption. The discussion demonstrates how innovation and accountability can coexist to strengthen India’s financial ecosystem.