“Reliance on AI can lead to risks, especially when a small number of technology providers dominate the market. This can increase systemic risks as errors or disruptions can spread across the entire financial sector,” Shaktikanta Das said at an event in New Delhi yesterday (October 14).

Indian financial services providers are using AI to enhance customer experience, reduce costs, manage risk and drive growth through chatbots and personalized banking.

The increasing use of AI is leading to new vulnerabilities such as greater vulnerability to cyber attacks and data breaches, according to Mr. Das.

The “opacity” of AI makes it difficult to audit and interpret the algorithms driving lenders’ decisions and has the potential to lead to “unintended consequences in the market.

Private credit markets have expanded rapidly globally with limited regulation, posing significant risks to financial stability, especially since they have not been stress-tested in a recession, Das said.