Algorithmic decision-making, data concentration pose systemic risks: RBI DG

RBI Deputy Governor Swaminathan J says fintech growth and technological interconnections require strong digital governance to prevent systemic vulnerabilities

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 (RBI), 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. “Innovation and safety are not opposing goals; when balanced well, they reinforce each other and build lasting trust,” 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.

 

“India is developing the Unified Lending Interface, which seeks to bring the same principles of openness and interoperability to credit markets. Just as UPI made payments universal, ULI has the potential to mark a turning point in how affordable credit is accessed and delivered at scale,” he said.

 

UPI revolutionised retail payments by integrating multiple accounts into a single mobile platform. “While UPI has rightly captured global attention, it represents only the most visible part of a much wider transformation. Behind it stands a comprehensive digital payments ecosystem that includes NEFT and RTGS for retail and high-value transfers, the Bharat Bill Payment System for interoperable bill payments, the Aadhaar Enabled Payment System for last-mile inclusion through micro-ATMs, and BharatQR for merchant acceptance,” he said, adding that these systems together form a layered, resilient, and inclusive architecture.

 

“They ensure that digital transactions are not only fast and convenient but also secure, accessible, and trusted—cornerstones of India’s transition from a predominantly cash economy to a thriving digital one.”