Algorithmic decision-making may pose non-traditional risks to financial system: RBI Deputy Governor Swaminathan J

Digital risks emanating from algorithmic decision-making and concentration of services in a few platforms, if left unchecked, can impact the broader financial system as they are not traditional threats, RBI Deputy Governor Swaminathan J has said.

The senior Reserve Bank official said that digital innovation is extending inclusion beyond payments. Micro-insurance and pension products are increasingly being delivered through digital platforms, helping low-income households strengthen financial resilience.

Cross-border UPI linkages are making remittances faster, cheaper, and more seamless, reinforcing trust in formal channels, he said while speaking at the World Savings and Retail Banking Institute (WSBI) Study Visit to SBI under the theme 'Advancing Financial Inclusion Through Digital Innovation' on October 6, 2025.


"At the Reserve Bank, we seek to foster an environment where innovation can flourish responsibly," he said.

Swaminathan said initiatives such as regulatory sandboxes, the Innovation Hub, and enabling frameworks for digital financial services, RBI encourage the development of new solutions that are secure, sustainable, and customer-centric.

"At the same time, we place due emphasis on governance, risk management, and customer protection, so that technological progress is always matched by resilience and trust in the financial system," he said.

The Deputy Governor further said 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.

"These are not simply traditional risks in digital form, but new frontiers arising from algorithmic decision-making, heavy dependence on data, concentration of services in a few platforms, and deep technological interconnections," he said.

Left unmanaged, such risks can quickly migrate from individual institutions to the broader system, Swaminathan said.

"This is why we encourage financial institutions to move to a proactive resilience mindset, embedding digital risk awareness and safeguards into their governance frameworks. Innovation and safety are not opposing goals; when balanced well, they reinforce each other and build lasting trust," the official said.

He also India's strong digital public infrastructure underpins its financial inclusion efforts.

At the centre of this architecture lies the India Stack - a set of interoperable, open, and scalable digital layers built as public goods, he added.