“I think for us as central bankers, the most significant of these is cyber risks.The growing use of information technology across financial systems and the increasing interconnection between financial institutions were adding a new dimension to cyber risks from AI”Reserve Bank of India Governor Sanjay Malhotra
Mumbai: Elevated valuations of artificial intelligence-related assets pose a downside risk to the global economic outlook, but cyber risks arising from the growing use of AI are a bigger concern for central banks, Reserve Bank of India Governor Sanjay Malhotra said on Wednesday.
The Governor made the remarks in response to an question at the post-policy press conference, after the RBI flagged elevated AI-related asset valuations among the key downside risks to the global economy.
“With a resolution of the West Asia conflict remaining elusive, significant downside risks to the global outlook remain, including further tightening of global financial conditions, continuing elevated AI-related asset valuations and high public debt,” Malhotra had said in his opening remarks during the Monetary Policy Committee meeting.
Asked by ANI whether the RBI’s concern was about an AI-driven asset bubble, disruption to the labour market or the broader impact on global financial stability, Malhotra said all these risks were material.
“Well, all these risks are material. I think for us as central bankers, the most significant of these is cyber risks,” he said.
The Governor said the growing use of information technology across financial systems and the increasing interconnection between financial institutions were adding a new dimension to cyber risks from AI.
Already in this day and age, when IT is being used by all systems and when there are no borders between the financial systems and they interact with each other, AI adds another dimension to it,” Malhotra said.
He said the RBI was taking steps through its regulatory and supervisory functions to strengthen the financial system against such risks.
“And so we have to be very vigilant with regard to this. Number of measures we are already taking, both through our regulation and supervision departments, and we are fortifying our systems so that we are able to mitigate and prevent cyber risks to emerge,” the Governor said.
The central bank has also raised its oil price assumption by USD 5 per barrel from the previous policy review, taking the annual average assumption to USD 95 per barrel.
The revision has been driven by the re-escalation of the West Asia conflict, persistently high crude prices and expectations in forward markets that oil prices would remain higher than levels seen during the previous policy reviews.
So oil price assumptions are given in the MPR (Monetary Policy Report), which has been released this time along with policy. It has increased by five dollars a barrel, and the reason is re-escalation of the conflict, prices remaining high, and the forward markets predicting that the prices would be higher than was seen in the last couple of policies,” Poonam Gupta, Dy Governor RBI said.
She said the increase was quantitatively not very large and reflected the RBI’s current assessment of how the annual average oil price could evolve.
“As you know, the situation is evolving, and this is our best estimate at this time of how the annual average will turn out to be,” she said, confirming the assumption at USD 95 per barrel.