RBI Governor Sanjay Malhotra used a speech in New Delhi on 3 October to set out five global risks to financial stability, and two of them come from technology: stretched valuations of AI-related assets, and cyber risk made sharper by AI. Speaking at the Fifth Kautilya Economic Conclave, he said India’s financial system is “very resilient” but warned that “today’s resilience may not necessarily imply tomorrow’s immunity”.
The address, “Preserving Financial Stability in an Evolving World”, is published on the Reserve Bank of India’s website. He said he was raising the subject “not because we see signs of any imminent stress” but because long calm periods can encourage risk-taking and leverage.
The five global risks
The Governor listed them in this order:
- Elevated global debt. Higher debt, shorter maturities and sharply higher sovereign bond yields can squeeze governments, strain borrowers and hit banks holding sovereign bonds. Emerging markets with large non-resident holdings of government debt may face outflows as the carry trade unwinds.
- Stretched asset valuations, particularly AI-related. Any slowdown in AI investment or earnings “could trigger a sharp repricing of financial assets, especially in the AI value chain”, he said, adding that rising leverage and declining free cash flows among major AI firms could amplify a correction.
- Elevated leverage at hedge funds, option sellers, exchange-traded funds and other non-bank financial intermediaries, which are increasingly linked to banks’ balance sheets.
- Private credit, where he cited high-profile defaults as a sign of weak lending standards.
- Cyber risks compounded by AI. AI has heightened cyber risk, model risk, third-party dependence and the erosion of human oversight, he said, and cyber risk is “the most immediate concern” for a financial system that “does not have national borders”.
He added that each risk on its own may not be a concern yet, but several occurring together could put “significant pressure on the global financial architecture”.
What he said about India
On India, the Governor said private credit is still small and not assessed to be a risk, and that NBFCs are assessed to be strong, with an average capital to risk-weighted assets ratio (CRAR) of 24.6% on 31 March 2026 against a requirement of 15%. He cited the June 2026 Financial Stability Report, whose stress tests showed banks’ aggregate CET1 ratio staying comfortable under all adverse scenarios.
Indian equity markets have corrected from high valuations in an orderly way, he said, and a correction in AI-related valuations in advanced economies “may be positive for capital inflows” into India if it happens.
On technology, he pointed to the RBI’s 2026 directions for commercial banks on technology and cyber-risk governance, covering board oversight, the role of the chief information security officer, access controls, third-party arrangements and incident response. He also mentioned draft model-risk guidance for regulated entities, including NBFCs, which covers explainability, red-teaming and human oversight of models.
Five priorities
He closed with five priorities for policymakers: accept that some shocks are inevitable and build resilience; assess a new generation of risks that may start outside finance, “with a geopolitical event, a cyberattack, or a technological failure”; collect better and more granular data; make resilience system-wide, including payment systems and critical third parties; and make sure innovation such as AI and tokenisation preserves “settlement finality, singleness of money, and financial integrity”.
The speech came two days before the Monetary Policy Committee’s October meeting. Meeting dates are on our RBI MPC schedule, and the current policy rate is tracked on our repo rate page.
Questions
Does the RBI see stress in India’s financial system now?
No. The Governor said he was not speaking because of “signs of any imminent stress” and described the Indian system as very resilient, while warning against complacency.
Why does AI feature twice in his list?
He named stretched AI-related asset valuations as a market risk and AI-amplified cyber attacks as an operational risk for a financial system that crosses borders.
Source
- Reserve Bank of India: “Preserving Financial Stability in an Evolving World”, special address by Shri Sanjay Malhotra, Governor, at the Fifth Kautilya Economic Conclave, 3 October 2026 (rbi.org.in, Speeches)
