RBI to Extensively Use AI, Advanced Analytics to Improve Regulatory Supervision

The Reserve Bank of India, in a press release on Wednesday, stated its plans to extensively use advanced analytics, artificial intelligence and machine learning to analyze and improve regulatory supervision on banks and NBFCs. 

The central bank also seeks to hire external experts for the same purpose. While the RBI already uses AI and ML in supervisory processes, it now intends to upscale by ensuring that the benefits of advanced analytics can accrue to the Department of Supervision in the central bank.

The department uses linear and a few machine-learnt models for supervisory examinations, with the supervisory jurisdiction of the RBI extending over banks, urban cooperative banks (UCB),  small finance banks, payment banks, and credit information companies, among others. 

With the goal of generating supervisory inputs, the central bank has given an expression of interest (EoI) for engaging consultants in the use of AI and machine learning, and advanced analytics. It says, "Taking note of the global supervisory applications of AI & ML applications, this project has been conceived for use of advance analytics and AI/ML to expand the analysis of the huge data repository with RBI and externally, through the engagement of external experts, which is expected to greatly enhance the effectiveness and sharpness of supervision.” 
It stated that the selected consultant will be required to profile and explore data with a supervisory focus, with an ‘objective to enhance the data-driven surveillance capabilities of the Reserve Bank’. The Eol added that, regulatory and supervisory bodies globally are using commonly referred machine learning techniques such as 'Supertech' and 'Regtech' for assisting supervisory activities. Most of these techniques are still exploratory, but are rapidly gaining popularity and scale.