RBI shortlists seven firms to use AI and ML for supervisory functions

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RBI shortlists seven firms to use AI and ML for supervisory functions
RBI shortlists seven firms to use AI and ML for supervisory functions

For engaging consultants for use of advanced analytics, AI and ML for generating supervisory inputs, RBI, in this September had invited expressions of interest (EoI)

To use artificial intelligence and machine learning (AI and ML) for supervisory functions, the Reserve Bank has shortlisted seven global consultancy firms, including Pricewaterhouse Coopers, McKinsey and Boston Consulting Group (India).

To analyse its huge database and improve regulatory supervision over banks and NBFCs, the RBI is looking to extensively use advanced analytics, AI and ML. The central bank plans to hire external experts for this purpose.

For engaging consultants for use of advanced analytics, AI and ML for generating supervisory inputs, RBI, in this September had invited expressions of interest (EoI).

The central bank has shortlisted seven applicants for participating in the request for proposal process (RFP) for the selection of consultant(s) based on the scrutiny/evaluation set out in the EOI document, according to an RBI document.

Accenture Solutions Private Limited; Boston Consulting Group (India) Pvt Ltd; Deloitte Touche Tohmatsu India LLP; Ernst and Young LLP; KPMG Assurance and Consulting Services LLP; McKinsey and Company; and Pricewaterhouse Coopers Pvt Ltd. are the seven firms.

To ensure that the benefits of advanced analytics can accrue to the Department of Supervision in the central bank, RBI, while already using AI and ML in supervisory processes, now intends to upscale it.

For supervisory examinations, the Department of Supervision has been developing and using linear and a few machine-learnt models.

The EoI issued in September said that the interest now is to explore the data to identify its attributes that can be leveraged to generate new and improved supervisory inputs.

The supervisory jurisdiction of the RBI extends over banks, urban cooperative banks, NBFCs, payment banks, small finance banks, local area banks, credit information companies and selects all Indian financial institutions.

To protect depositors’ interests and financial stability, it undertakes supervision of these entities with the objective of assessing their financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability.

With the help of on-site inspections and off-site monitoring, the RBI undertakes continuous supervision of SEs, the EoI said.

For assisting supervisory and regulatory activities, ML techniques (commonly referred to as ‘suptech’ and ‘regtech’) are being used by regulatory and supervisory authorities across the world.

Most of these techniques are still exploratory; however, they are rapidly gaining popularity and scale.

On the data collection side, for real-time data reporting, effective data management and dissemination, AI and ML technologies are used.

For data analytics, including liquidity risks, market risks, credit exposures and concentration risks; misconduct analysis; and mis-selling of products, these are being used for monitoring supervised firm-specific risks.

Also readTechnology leaders have to always be in a learning phase

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