RBI Governor Shaktikanta Das warns of over-reliance on AI
Reserve Bank of India (RBI) Governor Shaktikanta Das has raised alarms over the growing reliance on artificial intelligence (AI) in the financial sector. Speaking at the RBI@90 High-Level Conference in New Delhi, Das cautioned that over-dependence on AI could create concentration risks with only a few technology providers. He also pointed out systemic risks that could impact the entire financial sector in case these systems fail or are disrupted.
AI's growing use introduces new vulnerabilities
Das also noted that the growing use of AI brings new vulnerabilities like increased risk of cyberattacks and data breaches. He highlighted the opacity of AI as a challenge, making it hard to audit or interpret the algorithms driving decisions. This could even result in unpredictable market consequences. To mitigate these risks, Das stressed the need for banks and other financial institutions to have adequate risk mitigation measures.
Divergence in global monetary policies could trigger volatility
The RBI Governor also flagged the divergence in global monetary policies. He said easing in some economies, tightening in others, and a pause in several could trigger volatility in capital flows and exchange rates. This could potentially disrupt financial stability within the system. Das also highlighted the rapid expansion of private credit markets with limited regulation, posing significant risks to financial stability.
