Shaktikanta Das, Governor of Reserve Bank of India (RBI) on Monday 14 October said that too much dependence on Artificial Intelligence (AI) could lead to concentration risks with too few providers of the technology in the market. 

This can also increase systematic risks, such as failures or disruptions in these systems that may cascade across the entire financial sector. 

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

AI’s lack of transparency poses challenges in auditing or understanding the algorithms behind critical decisions, potentially leading to unexpected outcomes in financial markets. In response, banks and financial institutions need to establish robust risk mitigation strategies to address such risks, according to comments made by Reserve Bank of India (RBI) Governor Shaktikanta Das. These measures are crucial for maintaining stability and preventing unforeseen financial disruptions due to AI-driven decisions.

Governor Shaktikanta Das expressed concern that the divergence in global monetary policies—some economies easing, others tightening, and several on pause—could cause volatility in capital flows and exchange rates, thereby affecting financial stability. 

He also highlighted the rapid expansion of private credit markets, which are underregulated and have not been tested in an economic downturn, posing significant risks to overall financial stability. Das emphasised the importance of preparing for these potential disruptions.

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