While speaking at the 5th Kautilya Economic Conclave, held in New Delhi, RBI governor Sanjay Malhotra said that policymakers see calm as something to guard, not something to bank on.
India’s Resilience Amid Global Turmoil
Malhotra said that India has gone through a very prolonged period of financial stability. That is good news, but it carries its own danger. Long periods of stability can encourage risk-taking and leverage and weaken the appetite for prudence.
He underscored the need for proactive policymaking and said that policymakers say they see no signs of risk at present, but they stress that the country cannot afford to become complacent. As they put it, the cost is simply too high.
The focus has been on strengthening the resilience of the financial system, and by most indicators, that work is showing. Banks’ credit-deposit ratios are very comfortable, and the system has absorbed the West Asia supply shock quite well.
Means To Deal With Inevitable Shocks
However, the RBI chief issued some caution and opined that resilience-building also has limits. Trying to remove every risk would curtail investment, so the task is to strike a balance between safety and growth. Supervision is also getting smarter, with modern tools increasingly used to identify emerging risks.
He said that shocks are inevitable, and policymakers need to be prepared.
Some key measures for these include countercyclical policies, which are particularly important in countering shocks. Liquidity and solvency problems must be told apart, since they call for different responses.
Tackling Fiscal Turbulence
On the monetary and global fiscal paradigm, Malhotra said that monetary policy is not the usual tool for financial-system risks. There is also an awareness that monetary policy can get in the way of other objectives if stretched too far. The global environment has elevated both financial vulnerabilities and inflation risks.
The RBI governor touched upon how bond yields have hardened worldwide, with implications for sovereign borrowing. In India, government bond yields have risen only partially in response to global oil and bond prices.
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⚠️ “I Don’t See Any Signs Of Risk But We Need To Remain Alert”
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— CNBC-TV18 (@CNBCTV18Live) October 3, 2026
Global rates also bear on real interest rates at home, and domestically the interest lies in growth-inflation dynamics.
Geopolitics And Alignment
Touching upon the myriad ongoing conflicts and ensuing crises, he said that geopolitics is adding uncertainty. Fragmentation and realignment are interacting in ways that are difficult to predict.
Like PK Mishra earlier, he also touched upon conflicts in West Asia, which remain a source of exposure through higher commodity prices, though India is navigating it from a position of strength. That gives confidence it can withstand lingering shocks, and further measures are being taken to defuse the impact.
However, he noted that there is a silver lining. Indian equity markets have corrected from high valuations, which could be positive for capital inflows.
The most notable shift is in where danger may originate. A new system of financial risks is taking shape. The next financial shock may not begin in a bank at all but could be triggered by a geopolitical event or a cyberattack.
The Dangers Online
Malhortra, during his address at the conclave, also spoke of cyber risk being flagged as the most important concern, because it knows no national borders. This calls for scenario analysis in risk management and better monitoring, especially as the financial system grows more complex.
On the question of possible conflict between monetary policy and government debt management, the answer is that there is none. The two functions are separate and carried out by very different sets of people.
No Room For Complacency
India has been very cautious toward crypto for several reasons. These include the “singleness” of money and what its fragmentation would mean for monetary policy. The main problem is in cross-border payments. The underlying technologies, however, are being used both within the central bank and outside it.
The message is steady confidence paired with vigilance. India is in a position of strength, but the nature of risk is changing, and complacency is the one thing it cannot afford.
The 5th Kautilya Economic Conclave is being held in New Delhi from October 3 to 5, 2026, under the theme “Resilience in an Age of Flux”.
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