The Governor of the Reserve Bank of India (RBI), Shaktikanta Das, cautioned on Monday about the potential financial stability risks associated with the increasing integration of artificial intelligence (AI) and machine learning in the global financial services sector. Speaking at an event in New Delhi, Das emphasized the necessity for robust risk mitigation practices among banks.
Das highlighted that over-reliance on AI could lead to concentration risks, particularly if a few technology providers dominate the market. This concentration could exacerbate systemic risks, as disruptions in these technologies might have a cascading effect throughout the financial sector.
In India, financial service providers are leveraging AI to improve customer experiences, lower operational costs, manage risks, and foster growth through innovations such as chatbots and personalized banking solutions. However, Das warned that the widespread adoption of AI also introduces new vulnerabilities, including heightened exposure to cyberattacks and data breaches.
He noted the “opacity” of AI systems, which complicates the auditing and interpretation of algorithms that guide lending decisions, potentially resulting in unpredictable market consequences.
In a separate discussion, Das remarked on the rapid expansion of private credit markets worldwide, underscoring the limited regulatory framework surrounding them. He raised concerns that these markets, which have not undergone stress-testing during economic downturns, could pose significant risks to financial stability.
Related topics:
Bain Capital’s Kioxia IPO Plans Scrapped Amid Valuation Dispute with Investors
Italian Space Agency Chief Advocates for Regulated Private Investment in Space
Ambani’s Reliance Industries Clashes with Musk’s Starlink Plan