AI in Banking

Navigating the Legal Challenges and Regulatory Compliances

Abstract

This paper provides an analysis of the legal and regulatory challenges confronting banks as they incorporate artificial intelligence into their operations. It begins by exploring the nuanced landscape of operational risks, cyber laws, and the imperative of robust data protection measures. Further, it delves into the intricate web of compliance requirements, including those outlined in the Prevention of Money Laundering Act and the Negotiable Instruments Act. Additionally, the paper scrutinizes the impact of key legislative frameworks such as the IT Act, 2000, and its Amendment Act, 2008, shedding light on issues ranging from intermediary obligations to encryption standards and liability for cyber-related offenses. This paper also emphasizes the urgent need for clear and coherent statutory guidelines to facilitate compliance and ensure the seamless integration of AI technologies within banking practices.