AI, ML pose a risk to financial stability, says RBI Governor Shaktikanta Das

Concerned over high reliance on AI and machine learning in banking space, Reserve Bank of India Governor Shaktikanta Das on Monday said lenders ought to ride on vantages of big tech and not or way round.

Stressing that latest technological vancements such as artificial intelligence (AI) and machine learning (ML) have opened new avenues of business and profit expansion for financial institutions, he said, se technologies also pose financial stability risks.

" heavy reliance on AI can le to concentration risks, especially when a small number of tech providers dominate market. This could amplify systemic risks, as failures or disruptions in se systems may casce across entire financial sector," he said in his keynote dress at a conference organised by RBI here.

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

ditionally, AI's opacity makes it difficult to audit or interpret algorithms that drive decisions, he said, ding that this could potentially le to unpredictable consequences in markets.

"Banks and or financial institutions must put in place equate risk mitigation measures against all se risks. In ultimate analysis, banks have to ride on vantages of AI and Bigtech and not allow latter to ride on m," he said.

Growing digitalisation of financial services has enhanced efficiency of financial sector across globe but has also brought in several challenges that central banks have to deal with.

For instance, in modern world with deep social media presence and vast access to online banking with money transfer happening in seconds, rumours and misinformation can spre very quickly and can cause liquidity stress. Banks have to remain alert in social media space and also strengn ir liquidity buffers.

Talking about risk of digitisation, RBI Governor said in modern world with deep social media presence and vast access to online banking with money transfer happening in seconds, rumours and misinformation can spre very quickly and can cause liquidity stress.

Banks have to remain alert in social media space and also strengn ir liquidity buffers, he said.