RBI Governor Sanjay Malhotra addressed India financial stability risks and resilience at the Fifth Kautilya Economic Conclave on October 3, 2026. He outlined the tools, institutional framework, and emerging global threats shaping India’s financial outlook today.
India Financial Stability: Framework and Tools
The Reserve Bank of India uses a strong combination of tools to protect the financial system. These include prudent regulation, risk-based supervision, and macroprudential measures. Additionally, the RBI acts as the lender of last resort and deposit insurer, giving it broad authority to act swiftly.
Governor Malhotra noted that the RBI does not aim to eliminate all risks. Instead, it focuses on building resilience. For example, in 2023, the RBI raised risk weights on unsecured consumer credit to cool rapid lending growth. The Financial Stability and Development Council (FSDC) further coordinates policy across regulators and government agencies.
Meanwhile, the RBI follows a clear separation principle. Monetary policy targets price stability. Targeted regulatory and macroprudential tools, however, address financial stability risks separately.
Key Global Risks and What They Mean for India
Governor Malhotra highlighted five major global risks currently threatening financial stability. These are elevated global debt, stretched AI-related asset valuations, rising leverage among non-bank financial intermediaries, weak private credit standards, and AI-amplified cyber threats.
Therefore, India must remain alert even as its own financial system stays strong. Indian banks hold healthy capital buffers, with the June 2026 Financial Stability Report confirming comfortable CET1 ratios under all stress scenarios. NBFCs also maintain an average CRAR of 24.6%, well above the 15% regulatory requirement.
However, the Governor cautioned that today’s resilience does not guarantee tomorrow’s immunity. India is additionally taking steps such as diversifying import sources, building strategic petroleum reserves, and expanding free trade agreements to reduce external vulnerabilities.
Five Priorities for Safeguarding Financial Stability
Governor Malhotra concluded with five priorities for policymakers. First, build systemic resilience rather than try to prevent every shock. Second, assess new cross-border and interconnected risks carefully. Third, improve data quality for better risk monitoring. Fourth, extend resilience beyond banks to NBFIs, payment systems, and technology infrastructure. Fifth, ensure that innovation in AI and tokenisation strengthens trust rather than undermining it.
As a result, the RBI remains committed to proactive, forward-looking supervision. In central banking, the Governor remarked, invisibility of financial stress is perhaps the greatest measure of success.
Source: RBI Speeches
