RBI Governor Das Warns of Tech-Driven Disruptions in Financial System

Mumbai: On Tuesday, June 25, 2024, Reserve Bank of India (RBI) Governor Shaktikanta Das spoke at the 188th Annual General Meeting of the Bombay Chamber of Commerce & Industry in Mumbai. (Photo: PTI)

Governor Das highlighted that while the Indian economy is showing strength and resilience despite global challenges, the RBI remains vigilant about new risks. He specifically warned about potential disruptions in the financial system caused by new technologies.

Das mentioned that the current state of financial stability is quite strong, but the real challenge lies in maintaining and improving it. He noted that new technologies can enhance efficiency and customer experience but also pose risks of sudden and widespread disruptions to the financial system. This was stated in the foreword of the June edition of the Financial Stability Report, released on Thursday.

He stressed the importance of all stakeholders investing adequately to leverage technological advancements while also ensuring the security and soundness of their systems.

Das pointed out that stress tests indicate that banks and non-banking financial companies (NBFCs) will maintain capital levels above the regulatory minimum even under severe stress scenarios. However, he emphasized that the regulator remains cautious of emerging risks, including cyber threats, climate change, and global economic spillovers.

At a time when the global financial system is facing significant risks such as high public debt, stretched asset valuations, increasing economic and financial fragmentation, and frequent geopolitical conflicts, the Indian economy is demonstrating strength and resilience with strong macroeconomic fundamentals and buffers, Das said.

“Economic activity is growing steadily, and the financial system is stronger and more vibrant than it was before the recent crises,” he added.

Das stressed the importance of consolidating these gains and nurturing a financial system that is prepared for the future and supports India’s growing economy.

“As India’s contribution to global growth increases, our financial system must also modernize and deepen to become more global,” he said.

He also emphasized the need to develop an ecosystem that prioritizes customer interests, stating, “Ultimately, preserving customer trust is the cornerstone of safeguarding systemic stability.”