Reserve Bank of India (RBI) Governor Shaktikanta Das on Monday warned that heavy reliance on artificial intelligence (AI) could lead to concentration risks in the financial sector.
The governor was speaking at the 90th High Level Conference organized by the Reserve Bank of India in New Delhi.
He noted that the growing use of AI could allow a few technology providers to dominate the market, which could pose systemic risks.
“Heavy reliance on AI can lead to concentration risks, particularly when a small number of technology providers dominate the market,” Governor Das said.
The governor also noted that AI introduces new vulnerabilities, including increased susceptibility to cyberattacks and data breaches. The opacity of AI systems further complicates matters, making it difficult to audit or interpret the algorithms that guide financial decisions.
“Additionally, the opacity of AI makes it difficult to audit or interpret the algorithms that drive decisions. This could amplify systemic risks, as failures or disruptions in these systems could ripple across the board. of the financial sector,” Das added.
Governor Das emphasized the importance of banks and financial institutions implementing robust risk mitigation strategies to address these risks. He emphasized that while AI and Big Tech offer significant benefits, financial institutions must be careful not to become overly dependent on these technologies.
“In the final analysis, banks must take advantage of the benefits of AI and big tech and not allow the latter to take advantage of them,” Das warned.
He urged financial institutions to remain vigilant, emphasizing the need for a balanced approach to harnessing the potential of AI while addressing its inherent risks.
The governor’s remarks come at a time when AI and machine learning are increasingly integrated into financial services, improving efficiency but also raising concerns about cybersecurity, transparency and regulatory oversight.
With rapid advancements in technology, the RBI is working to ensure that the financial sector remains resilient to both traditional risks and emerging risks posed by AI and big tech.