Agentic AI in Indian Financial Services: Regulatory Gaps in the PA Master Directions and the Case for Anticipatory Governance

Abstract

Payment Aggregators are isolated from RBI’s FREE-AI Committee Report, despite the Report’s sweeping amendments to seven other Master Directions. This gap is not merely theoretical: the market has already moved ahead with commercial AI deployments in the payments and fintech space, the clearest example being the Pine Labs-OpenAI collaboration. Autonomous contract formation does not meet contractual law requirements, and the liability gap is unresolved. Legal commentators have proposed a workaround, though it remains without statutory or judicial recognition in India. This piece argues that targeted amendments to the PA Master Directions recognising Agentic AI are necessary to keep up with the industry. On the institutional side, a dedicated working group on Agentic AI in financial services under the newly formed AI Governance and Economic Group (AIGEG), along with anticipatory governance efforts by regulators, will be key.