The International Monetary Fund (IMF) has called upon central banks worldwide to strengthen oversight of artificial intelligence (AI) as its rapid adoption is transforming lending, trading, and financial control processes. The IMF warns that an inadequate governance framework could amplify systemic risks and cyber threats.
The IMF noted that under normal market conditions, the effects of AI are predominantly positive: AI execution contributes to increased liquidity, reduced transaction costs, and faster price discovery. However, during crises, these same characteristics can lead to heightened risks because AI has the capacity to make markets faster and more interconnected.
According to the IMF, future sudden market crashes may arise not so much from coding errors as from the parallel reaction of multiple AI systems to the same information. Therefore, regulators should focus on improving the transparency of AI usage, managing concentration risks, and strengthening international cooperation in cybersecurity.
These recommendations are particularly relevant for India, where the government and regulatory bodies are actively promoting the use of AI in the financial sector. AI is being used for tasks such as credit scoring, fraud detection, customer service, and regulatory supervision, while authorities simultaneously work to enhance control over AI-related risks.
As part of regulatory initiatives, the Reserve Bank of India's Regulatory Sandbox allows banks and fintech companies to test AI-based financial products under regulatory supervision. Furthermore, the Reserve Bank's Innovation Hub developed MuleHunter.AI to detect mule accounts used in cybercrime by analyzing transactions using AI.
The IMF also pointed out that while AI can help address the shortage of skilled personnel, it requires highly specialized knowledge, which is scarce in developing markets like India. IMF experts emphasized that supervisors will need stronger technical competence to assess increasingly complex AI systems, possibly by involving external specialized institutions.
Moreover, there is a risk of blind spots due to modeling and over-reliance on automated results, especially when systems perform poorly under stress. The IMF cautioned that growing dependence on a limited number of cloud service providers, data, and AI models could create new systemic vulnerabilities, as a failure at a critical service provider could potentially affect numerous financial institutions simultaneously.
In India, the government is also utilizing AI for credit scoring, enabling lenders to move beyond traditional scoring methods. Analysis of digital payment operations, Goods and Services Tax returns, bank statements, and utility payments helps improve access to formal credit for micro, small, and medium enterprises (MSMEs) making their first loan application and for informal sector workers. Government estimates suggest that such models could unlock an additional economic value ranging from $130 billion to $170 billion, narrowing the credit gap for small businesses.
The IMF recommended that AI should complement, not replace, the judgment of supervisory bodies. While AI-based technological solutions can improve market monitoring and faster identification of emerging risks, financial supervisors require stronger technical capabilities, governance standards, and human oversight to effectively manage complex AI systems.
In conclusion, the IMF stated that if policymakers act promptly and collaboratively, AI can strengthen global financial resilience. Otherwise, future instability could become faster, more correlated, and more difficult to manage than past episodes.
The Indian IT sector is facing pressure due to macroeconomic uncertainty, exacerbated by the conflict in the Middle East, as well as the disruptive impact of artificial intelligence adoption. This dual pressure is lowering investor sentiment and has led to a decline in stocks this year.
Companies HCL Technologies Ltd., Wipro Ltd., and Tech Mahindra Ltd. are preparing to present their financial results amid growing investor doubts about the value of traditional IT services in the age of artificial intelligence.
Negative sentiment in the sector intensified after American peer Accenture Plc forecasted slower quarterly revenue than expected. This confirmed concerns about weakening demand and contributed to a further decline in the IT index on the NSE.
Nevertheless, Tata Consultancy Services Ltd. managed to meet net income expectations thanks to cost-cutting measures that helped the company weather the slowdown in its core IT business. The analytical firm Jefferies noted that 'our recent interactions show that pressure on IT service budgets persists, putting pressure on discretionary IT spending.'
While Taiwan Semiconductor Manufacturing Co.'s earnings report will serve as an important indicator for the Taiwanese stock market, which remains influenced by the AI boom, the company will publish its June sales data on Monday after postponing the announcement due to Typhoon Bawi. This will give investors a clearer picture of the second quarter results.
Furthermore, on Saturday, India's Avenue Supermarts Ltd. failed to meet projected net income figures. The company decided to reorient its e-commerce strategy by closing operations in several cities that did not generate significant revenue for the group.
