Over-reliance on AI poses financial stability risks: Das

Reserve Bank of India (RBI) Governor Shaktikanta Das (pictured) on Monday warned that while artificial intelligence (AI) and machine learning (ML) have opened new avenues for business and profit expansion in the financial sector, over-reliance on these technologies could pose risks to financial stability.

- SUBRATA PANDA

As a result, banks and financial institutions must implement adequate risk mitigation measures, he said.

"The heavy reliance on AI can lead to concentration risks, especially when a small number of tech players dominate the market. This could amplify systemic risks, as failures or disruptions in these systems may cascade across the entire sector," Das said at an event in New Delhi.

The growing use of AI introduces new vulnerabilities, such as increased susceptibility to cyberattacks and data breaches, Das said.

"Also, Al's opacity makes it difficult to audit or interpret the algorithms that drive decisions, potentially leading to unpredictable market consequences," he said.

"In the ultimate analysis, banks have to ride on the advantages of AI and BigTech, and not allow the latter (these technologies) to ride on them," Das said.