Geoffrey Hinton, aged 75, known as the father of Artificial Intelligence (AI) has recently resigned as Vice President, at Google to speak about the potential risks of AI.

More than a thousand technology leaders and researchers have written open letters highlighting the rapid pace of AI development and how it could pose threats to society. One of the letters demands a hold on AI for 6 months so that its possible impacts could be studied by the government as well as the private sector before advancing further.

The Canadian government brought a bill to the parliament last year called Bill C-27 to regulate high impact AI systems. One of the important aspects of the bill is privacy concerns. But in India, we have already started using AI including in the banking sector. In Himachal small apple growers are affected by large ones who use AI and imported plants. RBI is already using AI for its data analysis and some banks have started using them for loan assessment. Here again, bigger banks will be at an advantage unless the RBI provides common AI tools like it developed the UPI platform.

It is worth looking at what Geoffrey Hinton, a cognitive psychologist and computer scientist is apprehending. His statement is compared with the statement of Albert Einstein when he found that the science he developed was being used for war and destruction.

“AI Chatbots are quite scary. Right now they are not more intelligent than us as far as I can tell. But I think they soon may be.”

“AI may pose more danger than Climate Change.”

Long-time back Peter Drucker known as a Management Guru said “Technology should assist the workers (humans) and not replace them.” But that is exactly what is happening now.

AI can pose the following challenges in the Banking Sector-

  1. An intelligent technologist can manipulate data in such a way that he can get a bigger loan which he will not be able to repay at all. Banks will have to write off the same when the time comes.
  2. Banks can also manipulate and submit data which may not be the correct data to RBI. Remember one Nick Leeson could bring down a hundred-year-old bank.
  3. RBI officials can be misled by AI and take wrong decisions leading to the collapse of the economy.
  4. The privacy of citizens will be totally lost as the AI will have all data of the customers. Even the foreign agencies that monitor and audit other firms, can use the data from RBI, leading to a total conflict of interest. They already have a poor track record in honesty.
  5. There will be a drastic reduction in staff in the banks which will affect the banking system in the long run.

The RBI’s decision to appoint a foreign audit firm for its Monitoring System using AI has come up for severe criticism. Now many who have technical expertise like Parminder Singh, from IT for Change, Sharad Sharma, from I Spirt & India Stack, and Smita Purushottam, of SITARA have come out openly and written to the RBI governor to not use foreign consultants. Articles have also been published about the same.

‘The RBI is the sovereign holder of the nation’s financial data, which is a strategic resource and a national/community asset or commons. A foreign corporation applying its AI engine on RBI data would involve the AI engine acquiring ever greater intelligence about Indian financial and macroeconomic conditions, which can and will be weaponized in the age of “intelligentization”. In the wrong hands, such AI can be used to manipulate financial data and financial markets to increase macroeconomic instability; disrupt economic activity; create false signals to mislead investors thus adversely impacting the functioning of the real economy; interfere with the functioning of critical infrastructure; and, even launch cyber-attacks on India’s financial institutions and critical infrastructure.

Secondly, due to the ‘blackbox’ nature of AI operations, which mostly involve partly pre-trained and/or pre-configured models, it will subtly but surely introduce foreign influence, and interests, into India’s central banking. Normally difficult to recognise initially, such AI-mediated influences become nearly impossible to reverse over time. As AI-based systems become mainstream, these extraneous influences tend to them become stronger by the day. This is an extremely serious matter of Indian sovereignty, not unlike the crypto-currency issue where the RBI’s stand has been exceptionally strong and clear.

Thirdly, most of the listed consultancies provide business intelligence to their clients in India and across the world, including in the financial sector. While driving AI-based regulatory and supervisory processes of the RBI, these foreign multinationals with privileged/free access to the central bank data of the entire national financial sector would also be offering financial intelligence services to their other clients in the Indian and foreign financial and business sectors. This creates very serious conflicts of interest. The AI algorithms of these foreign consultants will get massively enriched through access to the data treasure-house of one of the world’s biggest central banks. These foreign corporations will reap this value by developing and offering exponentially more valuable AI products domestically and abroad – especially, though not just, relating to India. This inter alia would displace potential Indian companies in similar lines of business, who should have a privileged use of what is essentially a national commons of financial data.

All this enables these consultancies to make tempting, low costs offers, which should be firmly resisted. While they seemingly give a service to the RBI, what immense value is being taken away in return is not factored in the cost-benefit analysis. In fact, we have come across cases in which government entities are later forced to pay for their own data, and their derivatives, after being trapped into signing outsourcing contracts. Once the entire financial sector data is with a foreign corporation, the RBI may have to later pay it for various needed data (e.g. enriched data) and AI. All the while, the RBI keeps becoming inextricably dependent on, and eventually may have to continually and eternally pay these foreign corporations, for AI-based financial sector regulation and supervision.

What they have argued is too important and RBI should immediately cancel whatever shortlisting it has done with foreign companies.

The government of India should constitute an expert group to study the impact of AI on the Banking System before going ahead.

It’s important to bring an Act on the use and control of Artificial Intelligence.

The Parliament Standing Committee should do a proper assessment before we jump into action.

When SBI entered into computerisation, it started its own subsidiary on technology, bought software from abroad but modified it completely to suit local needs. It was not dependent on the supplier.

RBI should take a similar effort and have its own experts who will not only monitor banking but also provide support services to the banks in India keeping in mind the national interest and not the international interest. Not depending on international consultants, would truly constitute ‘Atmanirbharta’.

Thomas Franco is the former General Secretary of All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.

Centre for Financial Accountability is now on Telegram. Click here to join our Telegram channel and stay tuned to the latest updates and insights on the economy and finance.