Tag Archives: SHAKTIKANTA DAS

RBI Governor Warns of ‘Systemic Risks’ from AI in Banking Sector

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The increasing use of artificial intelligence (AI) and machine learning (ML) in the global financial sector could pose significant risks to financial stability if not properly managed, according to Shaktikanta Das, the Governor of the Reserve Bank of India (RBI). Speaking at an event in New Delhi on Monday, Das emphasized the need for banks to adopt strong risk mitigation practices as they integrate AI into their operations.

Das highlighted that the financial sector’s growing reliance on AI could lead to concentration risks, particularly if a few technology providers dominate the market. “The heavy dependence on AI by financial institutions can amplify systemic risks. Failures or disruptions in these AI systems could ripple through the entire financial sector,” he cautioned.

In India, banks and financial service providers are increasingly using AI to enhance customer experience, reduce operational costs, manage risks, and boost growth through applications like chatbots and personalized banking services. However, this growing reliance on AI also introduces new vulnerabilities, including a heightened risk of cyberattacks and data breaches.

Das pointed out another key concern—the “opacity” of AI algorithms. The complexity and lack of transparency in AI systems make it difficult to audit or interpret the decision-making processes behind lending and other financial services. This could lead to unpredictable market outcomes, with potentially severe consequences.

In addition to AI-related risks, Das also raised concerns about the rapid expansion of private credit markets globally. These markets, he noted, are lightly regulated and have not undergone stress testing during a significant economic downturn. The unchecked growth of private credit could pose further risks to financial stability.

As the adoption of AI continues to reshape the financial landscape, Das urged banks and regulators to stay vigilant and ensure that adequate safeguards are in place to prevent systemic disruptions.

BREXIT Fall Out: PM Cameron to Quit in October

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Now that the UK has done what was expected in the last one decade, exiting from the European Union, Britain’s Prime Minister David Cameron has decided to quit from the office in October as the referendum went against his wish to continue in the Union.

In India, the government’s reaction is on expected lines that the economy has enough "firepower" to deal with the situation, and that the Reserve Bank of India (RBI) has been "working" on possible eventualities and the Economic Affairs Secretary Shaktikanta Das was upbeat on fundamentals. But let us face it — grim future ahead and perhaps another prolonged period of uncertainty and recession.

The BSE Sensex lost 1,050 points and investors have lost Rs.4 lakh crore in one day. The rupee touched the 68-mark, down by nealry one rupee in one day, indicating its weakness in a globally turbulent economy. "You know the pound sterling have been depreciating so all currencies have been depreciating," defended Das. With $360 billion in foreign exchange reserves with RBI, he said India’s position "is very sound and solid."

While the knee-jerk reaction is likely to cool in a coule of weeks, for Britain the changes will not be overwhelming as it had always played an outsider role within the European Union. Unlike other members, it had kept its currency, the pound sterling in tact and never joined the Schengen zone of passport-free travel in Europe. Its contribution to EU budget is also relatively less than others.

The pound sterling may see downward movement for sometime and so is India’s rupee but for the reality of entirely breaking away from the European Union may take about two years, if the current David cameroon’s government gives its consent and goes ahead with the referendum’s outcome to exit from EU. So, these two years will be sufficient for India to move closer to the UK both in terms of trade treaty and negotiate more opportunites.

While the immigration was a major cause of worry for Indians in Britain, they can breathe easy now with the exit plan putting a cap on 100,000 immigrants per annum taking concrete shape as no more EU immigrants can enter Britain so easily now. With the immigrants stopped from elsewhere, India may leverage the opportunity for a more favourable immigration policy with the UK.

Finally, the oil prices will fall following Brexit and it will squarely put in more reserves in RBI kitty. "So when oil prices decline, Indian economy benefits," said another Indian Finance Ministry official.

UK PM David Cameron to Resign in October.