Heavy reliance on AI may lead to concentration risks, says RBI governor

RBI Shaktikanta das

The central bank is worried over the raging adoption of artificial intelligence (AI).

Reserve Bank of India (RBI) Governor Shaktikanta Das on October 14 said too much dependence on AI it could lead to concentration risks with too few providers of the technology in the market. It may also amplify systemic risks, as failures or disruptions in these systems may cascade across the entire financial sector, he said.

“The growing use of AI introduces new vulnerabilities, such as increased susceptibility to cyberattacks and data breaches,” Das said in his keynote address at the RBI@90 High-Level Conference organised by the Reserve Bank in New Delhi.

AI's opacity makes it difficult to audit or interpret the algorithms which drive decisions. This could potentially lead to unpredictable consequences in the markets. Banks and other financial institutions must put in place adequate risk mitigation measures against such risks, Das said.

He feared that the divergence in global monetary policies – easing in some economies, tightening in a few, and a pause in several others – could trigger volatility in capital flows and exchange rates, disrupting financial stability in the system.

Private credit markets have expanded rapidly with limited regulation. They pose significant risks to financial stability, particularly since they have not been stress-tested in a downturn, Das said.