The Reserve Bank of India (RBI) Governor outlined five priorities for safeguarding financial stability at the 5th Kautilya Economic Conclave in New Delhi, held under the theme "Resilience in an Age of Flux". He said the next financial crisis is more likely to originate in geopolitical events, cyberattacks or technological failures than in traditional banking channels.
The conclave is a platform for discussing contemporary economic and policy issues. It was first organised in 2022 by the Institute of Economic Growth and the Ministry of Finance, and brings together Indian and international experts.
The first is systemic resilience. The Governor said the aim is to prevent shocks and also to ensure that financial institutions can absorb them and keep providing critical services under severe stress.
The second is understanding new-generation risks, which he described as exogenous, cross-border and interconnected. The third is better data: less fragmented, highly granular information on non-bank financial intermediaries (NBFIs), interconnected exposures and technology dependencies, since the quality of risk assessment depends on the quality of data.
The fourth is extending resilience beyond banks to NBFIs, payment systems, technology infrastructure and critical third-party networks. "Financial instability anywhere can become a threat to financial stability everywhere," the Governor said. The fifth is preserving trust as artificial intelligence and tokenisation spread. These can improve efficiency, he said, but their adoption must keep sound institutions, settlement finality and financial integrity intact.
On the global side, advanced economies face high debt-to-GDP ratios (the US is above 120%), shorter debt maturities and hardening bond yields. For emerging markets such as India, Brazil and Indonesia, this raises the risk of capital outflows if investors unwind carry trades, that is, borrowing in low-interest currencies to invest elsewhere.
Markets are also top-heavy because of the AI investment cycle, so a slowdown in AI spending or earnings could trigger a sharp repricing of assets. Hedge funds, ETFs and private equity firms have built up hidden leverage, a pattern compared with the UK's 2022 Liability-Driven Investment crisis, in which shadow leverage nearly collapsed British pension funds. Private credit shows stress through high-profile defaults and rising use of Payment-In-Kind (PIK) arrangements. Geopolitical fragmentation, including the West Asia conflict's effect on Red Sea and Suez Canal trade routes and US-China tech decoupling, and AI-driven cyberattacks add to the list.
Domestically, the RBI has voiced concern about unsecured retail lending, including instant loan apps and buy-now-pay-later schemes, with delinquency disproportionately high among borrowers under 25. Rapid retail participation in futures and options (F&O) and elevated valuations in some mid- and small-cap stocks are also flagged as stability concerns.
Fintech adoption of 87% has raised banks' reliance on third-party platforms, exposing them to cyberattacks, data breaches and API vulnerabilities. A falling share of low-cost CASA deposits is pushing up funding costs, and banks may lend to higher-yield but riskier segments to protect net interest margins.
Gold loans have become the largest non-housing retail loan category, growing at a 42.4% CAGR since March 2024, with outstanding loans above ₹5.14 lakh crore in May 2026. A sharp fall in gold prices could cut collateral value and raise credit and recovery risks for banks and NBFCs.
On macroprudential tools, the RBI is to continue higher risk weights on unsecured retail credit and NBFC exposures to curb credit booms. The Securities and Exchange Board of India (SEBI) is expected to apply PAN-level position limits on F&O, monitor delta-adjusted positions and restrict zero-day-to-expiry index options to protect household savings.
Banks are to mobilise CASA deposits to reduce reliance on volatile wholesale funding, and comply strictly with the Liquidity Coverage Ratio to counter sudden liquidity shocks. Against AI-driven fraud, the Reserve Bank Innovation Hub's MuleHunter.ai (RBIH MuleHunter.ai) is to be deployed rapidly.
For sovereign debt and cross-border liquidity risks, emerging markets are urged to follow the World Bank's three-pillar approach: structural reforms to mobilise domestic resources, external financial support and wider risk-sharing instruments. They are also urged to use the G20 Common Framework for faster, more predictable debt restructuring. Substantial forex reserves are meant to buffer abrupt capital outflows, while wider local currency trade settlement insulates domestic balance sheets from external monetary volatility.
With reference to the 5th Kautilya Economic Conclave, consider the following statements:
Which of the statements given above are correct?
Consider the following information:
| Measure | Described in the article as | |
|---|---|---|
| 1. | PAN-level position limits on F&O | To be applied by SEBI |
| 2. | RBIH MuleHunter.ai | To be deployed rapidly against AI-driven fraud |
| 3. | Higher risk weights on unsecured retail credit and NBFC exposures | To be continued by SEBI |
| 4. | Strict compliance with the Liquidity Coverage Ratio | Expected of banks to counter sudden liquidity shocks |
In how many of the above rows is the given information correctly matched?
Consider the following statements:
Statement-I: A sharp fall in gold prices could raise credit and recovery risks for banks and NBFCs.
Statement-II: Gold loans have become the largest non-housing retail loan category, and a fall in gold prices could cut the value of the collateral.
Which one of the following is correct in respect of the above statements?
