RBI FREE-AI Compliance Checklist: What Every Indian Bank Needs to Audit

The Reserve Bank of India released its FREE-AI guidelines as part of its broader responsible innovation framework. Unlike many regulatory frameworks that are principle-based and leave implementation open to interpretation, FREE-AI includes specific technical indicators that examiners look for. **F — Fairness:** - Demographic parity testing across religion, gender, geography, and employment type - Disparate impact analysis (the "4/5ths rule" adapted for Indian protected classes) - Feature Shielding documentation showing proxies for protected attributes have been identified and controlled - Quarterly fairness audits with documented remediation for any detected disparities **R — Resilience:** - Population Stability Index (PSI) monitoring at a minimum monthly cadence - Model Stability Score (MSS) tracking with defined drift thresholds and escalation procedures - Business Continuity Plan specifically addressing AI model degradation scenarios - Evidence of drift detection capability demonstrated during validation **E — Explainability:** - SHAP or equivalent feature attribution for every credit decision within 24 hours - Plain-language adverse action notices that translate feature attributions into customer-readable language - Audit trail of all explanations generated, stored for a minimum of 3 years - Documentation of XAI method selection and validation **AI — Ethics (Accountability + Integrity):** - Model governance register with version history, validation records, and change approvals - Named human accountability for each AI model in production - Ethics review committee sign-off for any new AI model deployment - Incident response procedure for model failures with defined SLAs