How is rapid digitalization changing financial risks according to the RBI?

The RBI states that rapid digitalization is reshaping financial risks, making traditional indicators insufficient and requiring a fundamental rethinking of stability, governance, and customer protection.

What new risks does AI and machine learning pose in banking, as per RBI?

According to the RBI, AI and machine learning in banking raise new questions of accountability, explainability, and fairness, especially when models drive critical decisions.

Why are common technology providers a risk for banks, according to RBI?

The RBI highlights that reliance on the same core service providers creates a new form of common exposure and concentration risk at the ecosystem level, impacting resilience.

Home / Business and Economy / RBI: Digital Banking Risks Outpacing Old Metrics

RBI: Digital Banking Risks Outpacing Old Metrics

12 Jan

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Summary

Digital banking requires supervisors to rethink stability and customer protection.
Risks in digital banking can materialize within hours, not weeks.
Ecosystem dependencies on common tech providers create new, often unseen, risks.

RBI: Digital Banking Risks Outpacing Old Metrics

The Reserve Bank of India (RBI) has issued a caution that the swift digitalization of banking is fundamentally altering financial risks. Supervisors and banks must adapt their strategies to ensure stability, governance, and customer protection in this evolving landscape.

Risks in the digital age emerge with unprecedented speed. Customer growth, misinformation, and liquidity stress can materialize within hours, demanding tighter supervisory feedback loops with faster responses and clear escalations. Dependencies on common service providers, cloud platforms, and cybersecurity tools create systemic risks that traditional financial ratios may not capture.

Artificial intelligence and machine learning offer efficiency gains but introduce new accountability and fairness questions. Increased digital entry points, coupled with sophisticated adversaries and potential weaknesses in vendor systems, necessitate a focus on resilience and recovery as core capabilities, ensuring innovation aligns with trust, resilience, and fairness.