Artificial Intelligence (AI) has become the game changer in the sphere of finance and commerce, as it leads to the reorganization of the functioning processes, the risk evaluation, and the regulation. This paper evaluates the opportunities, risks, and regulatory concerns that come with the use of AI in the financial systems with specific reference to the Indian context. The available literature shows that AI-based applications include credit scoring, fraud detection, algorithmic trading, and regulatory technology (RegTech) to improve efficiency, accuracy, and financial inclusion. According to reports by the international monetary fund and OECD, AI can enhance market efficiency and make the financial services accessible to more people due to the use of data to make decisions. Nevertheless, AI can also be integrated quickly, which presents considerable threats, such as bias in algorithms, absence of transparency, cybersecurity risks, and complete reliance on third-party technology providers. The experiences of the Reserve Bank of India and the current scrutiny of media underscore the issues of financial stability, responsibility, and ethical conduct (as a result of the extensive use of AI). Academic papers also emphasise that explainable and responsible AI systems should be employed to counter these risks. The paper is a synthesis of regulatory views of the world and the Indian policy discourse syllabus to measure the new form of governance that is geared towards a balanced innovation and financial stability and consumer protection. The findings imply that the ethical, transparent, and risk-based regulatory paradigm is a necessary factor to the sustainable implementation of AI in finance and commerce.
Mithilesh Ramdayal Gupta (Sat,) studied this question.