Heavy Reliance on AI, ML Pose Risk to Financial Stability Says RBI Gov
Mumbai: The Reserve Bank of India (RBI) governor Shaktikanta Das on Monday warned that heavy reliance on artificial intelligence (AI) could lead to concentration risks, especially when a small number of tech providers dominate the market.
Speaking at the RBI@90 High-Level Conference organised by the RBI in New Delhi, Das said, “Heavy reliance on AI can lead to concentration risks, especially when a small number of tech providers dominate the market.”
“This could amplify systemic risks, as failures or disruptions in these systems may cascade across the entire financial sector.
Moreover, the growing use of AI introduces new vulnerabilities, such as increased susceptibility to cyberattacks and data breaches.”
Das said that AI's opacity makes it difficult to audit or interpret the algorithms which drive decisions which could potentially lead to unpredictable consequences in the markets. He said that banks and other financial institutions need to put in place adequate risk
mitigation measures against all these risks. “In the ultimate analysis, banks have to ride on the advantages of AI and Bigtech and
not allow the latter to ride on them,” said Das.
The central bank chief also called for reducing time and cost of overseas remittances, as well as expanding real-time gross settlement
(RTGS) to settle transactions in major trade currencies such as dollar, euro, and pound. He also underscored the potential of Central
Bank Digital Currency (CBDC) to facilitate cross-border payments. “Remittances are the starting point for many emerging and developing
economies, including India, to explore cross-border peer-to-peer (P2P) payments. We believe there is immense scope to significantly reduce the cost and time for such remittances,” Das said.
He said that CBDCs is an area where India has the potential to facilitate efficient cross-border payments.
Going forward, he said, harmonisation of standards and interoperability would be important for CBDCs for cross-border payments and to overcome the serious financial stability concerns associated with cryptocurrencies.
