Unmanaged risks from algorithmic decision-making, heavy reliance on data, and linked technologies can quickly spread from individual institutions to the financial system, said Swaminathan J, deputy governor at the Reserve Bank of India, on Wednesday.
"The rapid rise of fintechs, digital platforms, and embedded finance models has expanded the boundaries of the financial system and created new types of risks," Swaminathan said in Mumbai, citing the concentration of services in a few platforms as another source of worry.
"Left unmanaged, such risks can quickly migrate from individual institutions to the broader system... That's the reason the RBI encourages financial institutions to be proactive and embed digital risk safeguards in their governance frameworks," he said.
Speaking about financial inclusion, Swaminathan said the Unified Lending Interface (ULI) will be a "turning point" in providing affordable credit at scale in the country. He compared the upcoming platform to the success of the Unified Payments Interface (UPI).
ULI was launched in August 2024 to connect borrowers, lenders and digital loan service providers to create a digital lending platform that will reduce the time for appraisals, especially for smaller borrowers in rural areas, and simplify multiple technical integrations.
-- Subrata Panda, Business Standard