Asianfin--The increasing use of artificial intelligence (AI) and machine learning in financial services worldwide could pose significant risks to financial stability, warned Shaktikanta Das, Governor of the Reserve Bank of India, during an event in New Delhi on Monday. He emphasized that while AI brings benefits, banks must implement appropriate risk mitigation practices.

Das expressed concern over the potential concentration risks, noting that a small number of technology providers dominate the AI landscape. This heavy reliance could exacerbate systemic risks, as failures or disruptions in AI systems could ripple across the entire financial sector.

AI is already being leveraged by Indian financial service providers to improve customer experiences, cut costs, manage risks, and fuel growth, including through tools like chatbots and personalized banking. However, Das cautioned that AI introduces new vulnerabilities, such as heightened exposure to cyberattacks and data breaches.

He also highlighted AI’s “opacity,” which complicates auditing and interpreting the algorithms that increasingly influence lenders' decisions, potentially leading to unpredictable outcomes in financial markets.

For further insight into the implications of AI in finance, you might explore research papers like *"The Role of AI in Modern Banking"* or *"Financial Stability Implications of AI and Machine Learning"* to deepen your understanding of the potential risks and opportunities AI presents in this sector.