The Reserve Bank of India (RBI) has released the Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) on 13 August 2025, providing a comprehensive roadmap for embedding AI into the financial sector.
Professor Pushpak Bhattacharya of IIT Bombay chaired a high-level committee that designed the framework. The framework highlights digital public infrastructure, indigenous AI model development, adaptive policies and AI innovation sandboxes. It focuses on capacity building within financial institutions and regulators.
For risk mitigation, it proposes board-approved AI policies, AI-specific consumer protection and audit mechanisms, as well as enhanced business continuity planning.
The report also highlights the growing reliance on third-party AI providers, clarifying the application of RBI’s outsourcing guidelines and recommending AI-specific contractual safeguards around bias, accountability and data use.
FREE-AI aligns with global regulatory trends, echoing the recommendations as laid by the Organisation for Economic Co-operation and Development and the Bank of England’s focus on resilience and systemic oversight. Its potential impact spans MSMEs — through fairer credit access and digital marketplace tools — to RegTechs (regulatory technology), where it complements industry codes of conduct.
AI is set to transform global finance, with investments across banking, insurance, capital markets and payments projected to exceed INR8 trillion (USD97 billion) by 2027. Generative AI alone is forecast to surge past INR1.02 trillion by 2033, growing at a staggering 28% to 34% compound annual growth rate, as institutions deploy it for customer engagement, automation and fraud detection.
At its core lie the seven sutras, or guiding principles: trust, people first, innovation over restraint, fairness and equity, accountability, understandable by design, and safety, resilience and sustainability. These principles underpin 26 recommendations structured across six pillars: infrastructure, policy, capacity, governance, protection and assurance. Together, they seek to balance opportunity with safeguards.
