MUMBAI (Reuters) – The increasing use of artificial intelligence and machine learning in financial services worldwide could lead to risks to financial stability and warrant adequate risk mitigation practices by banks, the governor of the Reserve Bank of India said on Monday.
“The heavy reliance on AI could lead to concentration risks, especially when a small number of technology providers dominate the market,” Shaktikanta Das said at an event in New Delhi.
This could increase systemic risks as failures or disruptions in these systems could spread across the financial sector, Das added.
India’s financial services companies are using AI to improve customer experience, reduce costs, manage risk and drive growth through chatbots and personalized banking.
The increasing use of AI introduces new vulnerabilities such as increased susceptibility to cyber attacks and data breaches, Das said.
The “opaqueness” of AI makes it difficult to monitor and interpret algorithms that determine lenders’ decisions and could potentially lead to “unpredictable consequences in the market,” he warned.
In addition, Das said private credit markets have expanded rapidly across the world with limited regulation, posing significant risks to financial stability, especially as these markets are not stress-tested during a recession.
(Reporting by Siddhi Nayak; Editing by Eileen Soreng)
