MUMBAI: RBI deputy governor Rohit Jain flagged concentration risk among banks as most of them become dependent on a few cloud, technology and model providers, warning that a common technology dependency could allow a disruption at one provider to spread across multiple financial institutions.Speaking at the Global Fintech Fest in Mumbai on Wednesday, Jain said emerging technologies such as artificial intelligence, tokenisation, distributed technologies and quantum computing could make finance cheaper, more accessible and responsive, but could also amplify risks by increasing the speed, scale and interconnectedness of financial systems.“I see three key concerns as emerging technologies become more deeply embedded in finance: speed, concentration and opacity,” Jain said. “None of these risks is entirely new, but technology can amplify them and allow their effects to travel through the financial system in ways that are faster, wider and sometimes harder to detect.”On concentration, Jain said financial institutions could increasingly rely on a relatively small number of cloud providers, technology vendors and model providers, often using overlapping datasets and similar infrastructure. This, he said, meant that the failure of a common provider could become a financial-system problem rather than an isolated institutional failure. “The concern is therefore 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.“An institution may outsource the computation, but it cannot outsource the consequence,” he said, adding: “Technology also does not eliminate traditional risks.”
