New Delhi: The Reserve Bank of India (RBI) will work with global consultancy firms McKinsey and Accenture to improve its regulatory supervision over banks and Non-Banking Financial Corporations (NBFCs) using artificial intelligence (AI) and machine learning (ML).PTI reported that “RBI is looking to use advanced analytics, AI, and ML to analyse its huge database and improve regulatory supervision over banks and NBFCs. For this purpose, the central bank plans to hire experts”.In September last year, the central bank had invited the expression of interest (EoI) from firms to be engaged as consultants to help RBI by generating supervisory inputs. Seven were shortlisted among the applicants, namely 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.Finally, the RBI has zeroed in on McKinsey and Company, and Accenture Solutions Private Limited. The project is set to cost Rs 91 crore.Although RBI has already been using AI and ML in its supervisory processes, it now intends to scale it up to ensure that the benefits of advanced analytics can accrue to the Department of Supervision in the central bank.According to the notification issued by the RBI in September last year, the Department of Supervision had already been developing and using linear and a few machine-learning models for supervisory examinations. But, it said the interest now is to explore the data to identify its attributes that can be leveraged to generate new and improved supervisory inputs.Banks, urban cooperative banks, NBFCs, payment banks, small finance banks, local area banks, credit information companies, and select all Indian financial institutions come under the supervisory ambit of the RBI.As part of its supervision, RBI assesses the financial soundness, solvency, asset quality, governance framework, liquidity, and operational viability of these institutions to save depositors’ interests and financial stability.The RBI, in its EoI issued in September last year, had said regulatory and supervisory authorities around the globe are using machine learning techniques (commonly referred to as ‘suptech’ and ‘regtech’) for assisting supervisory and regulatory activities. Although it said, most of these techniques are still exploratory, they are rapidly growing in popularity and scale.The RBI notification further went on to say that AI and ML technologies are used for real-time data reporting, effective data management, and dissemination in terms of data collection. As for data analytics, it said they are being used for monitoring supervised firm-specific risks, including liquidity risks, market risks, credit exposures and concentration risks, misconduct analysis, and mis-selling of products.