RBI Governor Shaktikanta Das has warned of the heavy dependence on artificial intelligence (AI). Speaking at the 90th High-Level Conference held by the Reserve Bank of India in New Delhi, Das cautioned that the use of AI could lead to risks in the financial sector.
“The heavy reliance on AI can lead to concentration risks, especially when a small number of technology providers dominate the market,” Shaktikanta Das said during the event.
The financial service providers in India are leveraging AI to enhance customer experience, minimize costs, manage risks and drive growth through chatbots and personalised banking. This growing use of AI brings new vulnerabilities like increased susceptibility to cyber-attacks and data breaches, Das said.
The complexity is increased by the opacity of AI systems, which makes it challenging to audit or interpret the algorithms driving financial decisions.
“Additionally, AI’s opacity makes it difficult to audit or interpret the algorithms which drive decisions. This could amplify systemic risks, as failures or disruptions in these systems may cascade across the entire financial sector”, Das pointed out.
Governor underlined how crucial it is for banks and other financial organizations to handle these risks by putting in place robust risk mitigation plans. He emphasized that even though Big Tech and AI have many benefits, financial institutions need to be careful not to rely too much on them.
Das stressed the necessity for a balanced strategy in leveraging AI’s potential while addressing its inherent risks. Furthermore, he urged financial institutions to maintain their vigilance.
The governor’s comments come with the growing integration of AI and machine learning into financial services, which improves efficiency but also raises questions around regulatory supervision, cybersecurity, and transparency.
Das has also emphasized private credit markets have expanded rapidly across the globe with limited regulation. This poses significant risks to financial stability, particularly since these markets have not been stress-tested in a downturn.
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