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RBI Governor Warns of Financial Stability Risks from Growing AI Use

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RBI Governor Warns of Financial Stability Risks from Growing AI Use

Shaktikanta Das, Governor of the Reserve Bank of India (RBI), has raised concerns about the risks to financial stability posed by the increasing integration of artificial intelligence (AI) in the financial services sector.

Speaking at the RBI@90 High-Level Conference in New Delhi, Das cautioned that a heavy reliance on AI could create concentration risks, particularly if a few technology providers dominate the market. He warned that failures or disruptions in AI systems could trigger cascading effects throughout the financial sector, heightening systemic risks.

Das also highlighted the vulnerability of financial systems to cyberattacks and data breaches due to the rising use of AI. The inherent “opacity” of AI algorithms complicates auditing and accountability, potentially leading to unpredictable market outcomes.

To mitigate these risks, Das urged banks to bolster their liquidity buffers and stay alert to developments on social media that could impact the sector. He stressed the necessity of implementing robust risk management practices to navigate these emerging vulnerabilities.

This conference, marking the RBI’s 90th anniversary, featured a keynote address by Das titled “Central Banking at Crossroads,” where he discussed the evolving role of central banks in the face of global uncertainties and underscored the critical balance between innovation and risk management in financial systems. The event also included panel discussions on the implications of emerging technologies, including AI, for central banking.