8OCTOBER, 2024During the RBI@90 High-Level Conference, Reserve Bank of India (RBI) Governor Shaktikanta Das stressed the importance of banks enhancing their liquidity buffers to prepare for unexpected situations. He also urged caution regarding the growing influence of social media and artificial intelligence (AI) within the financial sector. As banks increasingly rely on technology, Das emphasized that they must remain vigilant in the social media space while strengthening their financial safeguards to handle unforeseen challenges.Addressing the broader technological challenges, Das pointed out that AI and other technologies introduce potential risks to financial stability. One concern is the heavy reliance on a small group of dominant tech providers, which could lead to concentration risks. To mitigate these threats, Das advised banks and financial institutions to implement strong risk management strategies. He emphasized that banks should harness the benefits of AI and Big Tech while maintaining control rather than allowing tech companies to dominate the financial landscape.The increasing use of AI also introduces cybersecurity risks, with Das highlighting that AI's complexity and opacity make it harder to audit algorithms that drive key financial decisions. This could lead to unpredictable market consequences as AI systems become harder to interpret and regulate. Furthermore, he warned that these new vulnerabilities, such as cyber-attacks and data breaches, must be carefully managed to protect financial stability.Das also touched on the global growth of private credit markets, which have expanded rapidly but remain largely unregulated. He expressed concerns that these markets pose significant risks to financial stability, especially since they have not yet been tested during economic downturns. As these markets grow, there is a pressing need for stronger regulatory frameworks to ensure their stability.TOP STORIESSRI LANKAN GOVT TO RECONSIDER ADANI'S $440M WIND POWER PROJECTThe new administration in Sri Lanka, under the leadership of Anura Kumara Dissanayake, has indicated a possible change in its position on a significant wind energy initiative that was previously sanctioned for the Adani Group in India. The Attorney General's office notified the Supreme Court that the approval given by the previous government would be reconsidered by the new administration, according to reports.Adani Green Energy Ltd., overseen a project that faced challenges with its pricing structure, as stated by Foreign Minister Vijitha Herath. Addressing journalists after the Cabinet meeting, Herath emphasized worries about the approved electricity tariff for the project, indicating that the government would reconsider after the parliamentary elections.The Supreme Court was informed that a definitive ruling would be issued once the new Cabinet was in place after the elections. The NPP alliance, under Dissanayake's leadership, strongly opposed the project, presenting it as a threat to Sri Lanka's energy sector sovereignty and calling for a renegotiation of the deal's terms.The Adani Group pledged to invest more than $440 million in the construction of 484 megawatts of wind energy in Mannar and Pooneryn in the northeastern areas, as part of a 20-year contract. Nevertheless, the project has faced legal disputes, as petitioners have expressed worries over environmental concerns and transparency during the bidding process.Any possible cancellation or modification of the agreement would negatively impact Gautam Adani's larger goals in Sri Lanka. RBI GOVERNOR URGES BANKS TO STRENGTHEN THEIR LIQUIDITY BUFFERS
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