The Reserve Bank of India (RBI) is taking a significant step towards bolstering its regulatory supervision over banks and Non-Banking Financial Companies (NBFCs) through the integration of artificial intelligence (AI) and machine learning (ML) technologies. To achieve this, the RBI has partnered with two prominent global consultancy firms, McKinsey and Company India LLP, and Accenture Solutions Pvt Ltd India. This move aligns with the RBI’s aim to harness the potential of advanced analytics to strengthen its supervisory functions.
Selection Process and Partners:
In a strategic move, the RBI initiated a process to identify consultants proficient in advanced analytics, AI, and ML. The central bank, following a meticulous evaluation, chose McKinsey and Company India LLP and Accenture Solutions Private Limited India for the pivotal task. These firms will be instrumental in designing and developing systems that leverage AI and ML capabilities for regulatory supervision.
A Leap Towards Progress:
While the RBI is already employing AI and ML in its supervisory processes, the institution is now poised to take this implementation to a higher level. By embracing advanced analytics, the RBI intends to unlock the full spectrum of benefits these technologies offer.
Evolution of Supervision:
The RBI’s Department of Supervision has already embarked on a journey of utilizing machine-learned models alongside traditional linear models for supervisory examinations. Through this collaborative initiative with McKinsey and Accenture, the RBI aims to delve deeper into data exploration. The objective is to uncover underlying attributes within the data that can be strategically harnessed to generate superior and novel supervisory insights.
Industry Trend and Significance:
As the global landscape witnesses the surge of AI, regulatory and supervisory authorities are embracing the capabilities of machine learning techniques. The integration of AI and ML technology holds immense potential, particularly in real-time data reporting, effective data management, and seamless dissemination of critical information.
The RBI’s supervisory authority extends its reach over a diverse array of financial entities, including banks, urban cooperative banks, NBFCs, payment banks, small finance banks, local area banks, credit information companies, and select All Indian Financial Institutions. This comprehensive reach underscores the significance of robust and technologically advanced supervisory mechanisms.