Future of Regulatory Compliance in BFSI: AI as a Force Multiplier

Banks, NBFCs, Insurers, and AMCs need to cater to expectations from multiple stakeholders: they must deliver profitable growth for shareholders, provide smoothest possible customer experience, ensure employee satisfaction – all these while ensuring strict compliance with regulations that safeguard consumer interests and the broader economy.

For leaders across the BFSI sector, the challenge lies in being continuously compliant at the lowest possible cost. The question is: how can organizations gain real-time visibility, maintain control, and adapt quickly to evolving regulations without exploding cost of compliance or diverting talent from growth initiatives?

AI, particularly Generative & Agentic AI, offer a compelling answer.

There are two areas where AI can unlock disproportionate value:

1. Aligning with Upcoming Regulations

Consider IT and Data Security policies in a typical bank. When the regulator releases a new circular, it often triggers months of manual work:

• Teams painstakingly review every clause of the circular.

• They compare it, point by point, with existing internal policies.

• Legal teams spend weeks addressing clarification queries.

• Action items are drafted and escalated to leadership for approval.

By the time all this groundwork is completed, precious months are lost—and not a single action has yet been implemented. Opportunities to drive transformation are delayed, and valuable talent is consumed by compliance analysis instead of business growth.

Now imagine an AI Agent that:

• Reads and interprets regulatory circulars in minutes.

• Compares them with your organization’s existing policies, point by point.

• Resolves many of the standard legal queries automatically using a repository of past clarifications and regulatory context it has been trained on

• Produces a summary of non-compliance issues and recommended actions instantly.

Instead of weeks of analysis, leaders get actionable insights within hours. Key teams can redirect their energy toward execution and innovation, while compliance becomes faster, more reliable and less resource-intensive.

2. Designing Products and Policies in Compliance with Regulations

Take the example of a Life Insurance Company designing a new Term product. Traditionally, most of the effort goes into two aspects: a. Market Research to Scan the market for existing products in the category (Term, in this example) and tracking the trends of the season and having an eye out for the upcoming regulations that might affect the category b. Preparing filing documents in line with regulations and company practices. This leaves little time for actual product innovation, thinking new ideas and brainstorming.

Agentic AI flips this imbalance:

• Market Intelligence: AI agents can continuously scan the market, compare products, surface trends, and highlight regulatory developments that might affect product design. The groundwork is already done and Product Teams can start their work consumingthe insights, rather than spending weeks creating insights

• Smart Documentation: AI can work with the Product Team through a conversational interface, ask the right questions, pull from past filing documents, and generate draft filing documents within hours. Teams only need to review and refine before filing.

The result? Faster product development cycles, reduced compliance burden, and more time spent on real innovation that drives customer and shareholder value.

Next Steps for BFSI Leaders

1. Identify a Compliance-Heavy Process

Start small. Pick one area that consistently drains time and resources—be it IT security audits, product filing documentation, or quarterly/ annual reporting. This should be a process with high regulatory dependency but low perceived strategic value, so AI can free up bandwidth without disrupting core operations.

2. Run a Pilot with Clear Outcomes

Frame the pilot with tangible success metrics:

A well-defined pilot helps you build confidence internally and demonstrate ROI without large-scale investments.

2. Reduction in turnaround time (e.g., from 6 weeks to 6 days).

3. Reduction in manual errors

4. Percentage of manual queries automated.

5. Hours of leadership and compliance staff time saved in following up and collecting information.

3. Scale Gradually Across Functions

Once you see results, extend AI usage into adjacent functions - Each extension compounds the benefits and strengthens organizational readiness for future regulations.

4. Establish Guardrails Early

Governance, transparency, and explainability must be baked in from the start. A compliance solution is only as strong as the trust regulators and auditors have in its accuracy. Make safety and traceability part of your AI adoption roadmap.