In a keynote address at the RBI@90 High-Level Conference, RBI Governor Shri Shaktikanta Das warned that while AI presents opportunities for business growth, it also introduces systemic risks to the financial sector. He emphasized that the dominance of a few AI providers could lead to concentration risks that exacerbate these vulnerabilities. The potential for AI to amplify financial instability is further heightened by its lack of transparency, making algorithmic decisions difficult to audit and potentially leading to unpredictable market outcomes.
Das expressed his concerns regarding the growing reliance on AI, stating that this dependence could render financial institutions more susceptible to cyberattacks and data breaches. "The opacity of AI technologies creates challenges in understanding and interpreting algorithmic behavior, leading to risks that could cascade through financial systems if not properly managed," he added, urging banks to adopt robust risk mitigation strategies to address these challenges.
Instead of shunning AI, Das encouraged financial institutions to leverage its advantages while implementing proactive measures against the associated risks. He articulated the need for banks to navigate their relationship with Big Tech strategically, ensuring that they are not overly reliant on external players for critical services. He remarked, "In the ultimate analysis, banks have to ride on the advantages of AI and Big Tech and not allow the latter to ride on them."
In addition to addressing AI concerns, Das advocated for improvements in cross-border payment systems. He mentioned that India's Unified Payment Interface could play a significant role in facilitating peer-to-peer transactions internationally. He also suggested that enhancing interoperability between central bank digital currencies (CBDCs) across nations may help streamline global cash flows, thereby fostering more efficient international financial interactions.
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