RBI deputy governor Rohit Jain flags three concerns as technology reshapes finance

As technology makes finance faster, it could also make financial risks spread faster and further, Reserve Bank of India (RBI) deputy governor Rohit Jain said on Wednesday, flagging speed, concentration and opacity as three emerging concerns.

Speaking at the Global Fintech Fest, Jain said none of these risks is entirely new, but technology can amplify them and allow their effects to travel through the financial system faster, more widely and sometimes in ways that are harder to detect.

Elaborating on the concerns, Jain said automated systems can analyse information and initiate actions far faster than humans can respond. “At machine speed, resilience cannot depend only on preventing every error. Institutions must also be able to detect problems early, contain their effects and intervene before a small mistake becomes a much larger one,” he said.

On concentration, he said financial institutions may increasingly depend on a relatively small number of cloud providers, technology vendors and model providers, often using overlapping datasets and similar technological infrastructure. The concern, therefore, is not simply the failure of one institution, but the possibility that a common dependency could transmit disruption or error across many institutions at the same time, he said.

On opacity, the third concern, Jain said advanced models can identify relationships and arrive at decisions in ways that may be difficult to explain. Greater sophistication, he added, cannot mean weaker accountability.

“An institution may outsource the computation, but it cannot outsource the consequence. A customer affected by an important financial decision deserves something more meaningful than being told that the model said so,” he said.

Old risks, amplified

These concerns arise in a financial system whose underlying risks remain familiar, Jain said. Borrowers can still default, liquidity can still disappear, leverage can still magnify losses and operational failures can still disrupt financial services.

“Technology does not make these risks vanish. Instead, what it can change, sometimes significantly, is their speed, scale and transmission,” he said.

Amid discussions about algorithms, tokens, platforms, cloud infrastructure and quantum computing, Jain said, it is important not to forget that there is always someone at the other end of the technology.

There is a saver entrusting an institution with hard-earned money, a borrower seeking an opportunity, a merchant awaiting a payment or a family depending on the financial system when it matters most, he said.

“Most customers will never know which model made a recommendation, which cloud hosted it or which technology enabled a transaction. They will, however, experience the outcome. Their confidence in technology will ultimately depend not on how sophisticated it is, but on whether it works for them fairly, reliably and safely,” he said.

According to Jain, purpose, prudence and policy therefore have to move together.

“Purpose without prudence can become recklessness. Prudence without purpose can become stagnation. Policy is what binds the two together at scale. The objective should not merely be to make finance faster or smarter, but to ensure that technological progress makes finance more useful, resilient and responsive to those it serves,” he said.