Participants from the Reserve Bank of India:
Shri Sanjay Malhotra - Governor, Reserve Bank of India
Shri T. Rabi Sankar - Deputy Governor, Reserve Bank of India
Shri Swaminathan J - Deputy Governor, Reserve Bank of India
Dr. Poonam Gupta - Deputy Governor, Reserve Bank of India
Shri R. Lakshmi Kanth Rao - Executive Director, Reserve Bank of India
Dr. Ajit Ratnakar Joshi - Executive Director, Reserve Bank of India
Shri Sanjay Kumar Hansda - Executive Director, Reserve Bank of India
Shri Indranil Bhattacharyya - Executive Director, Reserve Bank of India
Shri Kesavan Ramachandran - Executive Director, Reserve Bank of India

Moderator:
Shri Brij Raj - Chief General Manager, Reserve Bank of India

Brij Raj:
Good afternoon, everyone. Welcome to this Post-Policy Press Conference, First for the Financial Year 2026-27. We have with us, Governor, Reserve Bank of India - Shri Sanjay Malhotra along with Deputy Governors - Shri T. Rabi Sankar, Shri Swaminathan J and Dr. Poonam Gupta. We also have with us today, Executive Directors - Shri R. Lakshmi Kanth Rao, Dr. Ajit Ratnakar Joshi, Shri Sanjay Kumar Hansda, Shri Indranil Bhattacharyya and Shri R. Kesavan. I also welcome my other colleagues from the Reserve Bank.

Before we begin, we have a few housekeeping announcements. Sir, there are 27 participants from the media. I will request the media persons to please stick to one question so that everyone gets a chance. I also request everyone to switch on the mic while speaking so that those watching the live telecast are able to hear clearly. And once you have finished speaking, please switch off the mic. Sir, with your permission, I will now call out the names.

Sanjay Malhotra:
Yes.

Brij Raj:
Thank you, Sir. I will request Ms. Latha Venkatesh from CNBC-TV18 to please ask the first question. Latha, please.

Latha Venkatesh, CNBC-TV18:
Thank you, Mr. Brij Raj and Governor. So what looked like the structural shift in this policy is that you all have started giving us core inflation number. So, a couple of questions attached to that.

Core is non-food, non-fuel. So, if you are giving us that number, are you indicating that even if inflation headline goes up, but core doesn’t because that could be because of a change in fuel, you will not be moved? Are you trying to give us a message? And in that case, can you also give us the quarterly core break-up at some point in time, may be from next time?

The more important part is if you look at your second half, while the full year average is 4.4, even then one percentage point above last year, the second half average core goes nearly to 5%. So, should the market be prepared for a rate hike in the second half? As you lower down liquidity, will VRRR return?

Sanjay Malhotra:
So, first of all, let me compliment you to have been very nimble in your question. You have noted the change that we have made in this policy statement. I am very happy that you have noted that. This has been a request which has been there from the market participants. And so, we thought that while this has always been a factor, so in that sense, I would not say it is a shift. It is not a shift in terms of monetary policy decision-making. But it is only we thought that this was the right time to do it because we did the five-yearly review. So, there was a second five-yearly review, which was completed. And so, we thought that this is the time, if we have to do something about it and give our projections on core, which we have been doing internally. And so that’s why these numbers have been given.

Monetary policy is not preset course of action as I have stated even earlier. Even in the last statement, I think I made a mention of this. While for us it is the headline, which is the target, and we have to ensure that it is headline that remains at target and within the band. That is the goal. That is the primary goal for us. But at the same time, the various components of inflation and where they are emanating from, are also very important. And so that has been the consistent policy of the Monetary Policy Committee and of the RBI. And we will continue to look into all components and then take a call as to how we need to respond to the various components while keeping in mind that the ultimate target is headline inflation and it is not anything else.

Latha Venkatesh, CNBC-TV18:
First of all, there is an adverse scenario. Inflation you have increased by 50 basis points. Growth you have brought down less. So, it can be interpreted as...

Sanjay Malhotra:
So, that is why I said it is not a preset course of action. It is for the Monetary Policy Committee to decide, to take a call. These are the factors which go into it. How they are going to play out over a period of time, we will take a call. Things are evolving so drastically and so frequently every day. You yourself mentioned 5:30 AM, we got a pleasant news. May be not a complete surprise, but we got some pleasant news. And so, we have to be prepared. And so, we will not be in a position to say what the MPC is going to do in the next meeting.

Brij Raj:
Thank you, Sir. We will take some more questions from our left side before we come to this side. So, for the next question, I will request Shri Manojit Saha from Business Standard. Manojit, please.

Manojit Saha, Business Standard:
Thank you. One year ahead, inflation forecast is 4.7%. You have given it here. The real rate is just 50 basis points, while the neutral rate is sitting around 1.5, 150 basis points. So, are you falling below the neutral rate? Number two, if you can also throw some light on the recent RBI steps to curb the rupee depreciation, the cap banning banks offering contracts to clients? Are you satisfied with the rupee’s behavior in the last few days? And now the scenario has changed completely, is there any case to withdraw those limits and caps?

Sanjay Malhotra:
A lot of questions.

Manojit Saha, Business Standard:
Two questions only.

Sanjay Malhotra:
Two questions. So, your second question first, which is on the recent regulatory measures that we took with regard to the foreign exchange markets. You are all aware and you may not have witnessed, but we did notice that in the last few weeks of last month, March, there was heightened volatility in the forex markets. We saw that positions were being built up leading to arbitrage positions between the non-deliverable forward markets and the deliverable markets.

In normal times, these linkages are important for an efficient price discovery. And that is why it has been our endeavor to widen and broaden and make these markets more liquid. But when there is excessive volatility, when there is excessive building up of positions, this is only increasing volatility and perhaps not helping in price-efficient price discovery. Such kind of measures are taken. And these are reactions. These are reactions to the specific market movements. In any sense, they are not signaling any structural change. We stand committed. In long term, we stand committed to the development, broadening and deepening of these markets for the internationalization of the rupee. And so obviously, these are not measures which are going to remain there forever. As and when we see that and you have seen so much of fluctuation. You can yourself see how the rupee has been so volatile. So, it is basically arising out of that.

With respect to your first question on the neutral rate, while first of all, we do not have very precise numbers on the neutral rate, but there have been occasions when the real rate that because, first of all, you do not have a neutral rate. So, what is the neutral rate? So, it is difficult to calculate what the actual rate should be. But real rates, as of now are still high. Looking ahead, as I said, there is so much of uncertainty to be acting on those today. And especially when the MPC noted that there is so much of uncertainty, number one, and moreover, it is coming from the supply side. Having noted that, that is why the MPC thought that this is a time to pause, wait for more data, and then take a call. Real rates today are still about 2% or so. They are not low. Going forward, how it happens, so much of uncertainty. We need to wait and watch.

Brij Raj:
Thank you, Sir. I will now request Anup Roy from Bloomberg to ask his question. Anup, please.

Anup Roy, Bloomberg:
Sir, thank you for giving an elaborate answer on this rupee thing. So, going back to your rate call, I mean, the guidance in February policy that rates will remain low for longer - 9 to 12 months, barring any shock. The shock has come, but today we have some clarity also. So, would you give that comfort again that rates will remain low if the shock is dissipated?

Sanjay Malhotra:
I mean, see, we are in a neutral state. Possibility either way, anyways cannot be ruled out. So, it is quite possible that these low rates continue for a long time. As I mentioned, structurally, Indian economy is very strong, very resilient, very robust.

You know, despite shocks we are projecting 6.9%. Despite such a big shock, 6.9% real GDP growth. And you look across, I mean, independent of what other economies are growing. But if you look at relative to them, even better. So, structurally, long-term macroeconomic fundamentals, because of various measures which the government has taken, which the RBI has taken, which various institutions have taken remain to be very strong and continue to drive growth on the one hand, and at the same time keep price pressures contained. So, it is quite possible that even in the short to the medium term, we will continue to have low rates. It is quite possible.

Brij Raj:
Thank you, Sir. I will now request Ms. Hamsini Karthik from Moneycontrol to ask her question. Hamsini, please.

Hamsini Karthik, Moneycontrol:
Thank you. Good afternoon, Governor and DGs and everyone. I would like to drift a little from some of the macro points. And as your speech was concluding, the bank stocks really cheered your Monetary Policy today. You came up with a lot of leeway in the way that they can operate, etc. A couple of things I would like to understand from you, Governor. Is you are open to reviewing the computation of Net Profit back to CRAR and you are open to letting go or not consider the 25% increased threshold on GNPA? I would like to understand what triggered this review process within RBI? And do you believe that you will see a reasonable amount of capital flowing into banks as a consequence to this? And the reason I am also asking this question. I would like to get a good answer to this question is because in the last 6-8 months, more so, we have seen a lot of banks, almost like every 2 weeks we have had some bad news or the other from banks largely private banks. I take your point that this is not a systemic risk, but with the way banking is changing globally and also faster in India, do you see a need to enhance or rather do you see a need to possibly tweak more on regulations or you believe supervision can take care of these nagging pains that come up every few times?

Sanjay Malhotra:
Two questions broadly.

Hamsini Karthik, Moneycontrol:
Connected questions.

Sanjay Malhotra:
Two quite different questions but connected. Smartly you have connected the two.

Hamsini Karthik, Moneycontrol:
Banking questions.

Sanjay Malhotra:
Banking questions. So, the first one is on capital related measures that we announced today, two of them. The first one, I think both of them have been in the works for some time. They are not that way surprises. The banks have been requesting us, and I think NBFCs already had similar provisions. So, it was time that we aligned it with regard to the first change that has been made.

With regard to the calculation of CRAR, it does not change the calculation of net profit. It only changes the calculation of the capital adequacy. It is a better reflection of the capital that the banks have Similarly, the second measure that has been announced with regard to the investment fluctuation reserve, that also does not. There has been a chequered history, if I may say so. It was there, then it was withdrawn. Then again, it was brought in. This is something which is not there in any other jurisdiction. And there was lack of clarity also with regard to it. And moreover, as I mentioned in my statement, a number of prudential regulations that we brought in, we did not feel that there was a need with regard to it.

On the second part of your question, which is perhaps relating to some of the episodes that we witnessed in some of the private sector banks, I want to assure everyone through the media present over here that the banking system is very resilient. It is very safe and strong, there are number of regulations, whether it is relating to conduct, governance, prudence, liquidity, all of them, along with our supervisory framework. They keep the banking system very healthy and robust. These are episodes. These are more in the nature of crimes. And while we have to be vigilant and alert to them, the law enforcement mechanism, obviously in our country, will also take care of these. You want to add? Anything?

Swaminathan J:
It is perfectly fine, Sir. In terms of, these are entity-specific developments. Do not pose any systemic risk at this point in time as we have clarified that as they play out, we deal with them on a bilateral basis as this plays out. But as Governor said that banking system as a whole remains resilient and we continue to focus on improving the conduct-related matters and governance-related matters. And banks are by and large run on very professional lines. And any material supervisory concerns as and when it arises are dealt with on an event-specific basis.

If anything requires at a system level or a regulatory tweak as you were alluding to, that we are not averse to taking such measures, but at this point in time, there is no event that warrants a macroprudential measure or a regulatory tweak. These are episodic. We will handle it on an individual basis.

Brij Raj:
Thank you, Sirs. I will now request Ms. Ekta Suri from Zee Business to ask her question. Ekta, please.

Ekta Suri, Zee Business:
Good afternoon, Sir. Sir, my question is, we were talking about governance. Sir, recently, if we put aside frauds, I will name them as well, Kotak Mahindra Bank or IDFC First. But if we talk about HDFC Bank as well, the resignation made a lot of headlines. It was clearly written there that it is a matter related to ethics and governance. But after that, when it was asked to Chairman, Shri Atanu, after his resignation that what are the issues, he did not say anything openly. But yes, in the interview, he did say that why are you asking me what the issues are? You should introspect yourself.

Here, my question is, money talks with money. But here, you resigned. The shareholder was harmed. The value of his share fell down. For the customer of the bank, a seed was sown in his mind that I do not know what ethics and governance issues are going on. Is my money safe or not? So, now, as Sir said, we will think about its rules a little more. So, here, (a) Has RBI found anything in minutes in which there are really issues of ethics and governance? But yes, it did not reach the media, the shareholder and the customer. (b) Secondly, if it has not found anything like this, then will there be any such rule that tomorrow, if anyone is resigning related to the board and using a vague language, if they want to go, they can go. But using a vague language, do not put a doubt or mistrust in the mind of a customer. And secondly, a shareholder who has nothing to do with emotions, do not lower the value of his shares.

Sanjay Malhotra:
On the first question, first of all, we do not answer any bank-specific question. But yes, as you know this is well-known, everyone knows that we gave our press note in the press in which we said that, according to us, there was no material concern related to governance or conduct. So, I would like to repeat here, that there is no material concern, whether in our supervision, or by looking at their records, no matter related to governance or conduct, has come to our attention.

Ben Jose, The New Indian Express:
Sir, you say that after checking the minutes of the board meetings?

Sanjay Malhotra:
In general, in our supervision, the minutes are also seen. We also get a copy of the minutes. So, after seeing all of them, the press notice that we issued, we have issued it after keeping all the things in mind.

Is there any need for any change in the guidelines and directions for this? It does not seem so to us today. But, if it is felt that in the future, if there is a need to change any rule or a new rule or a new direction is to be made, we would see. And you all would know the guidelines given by SEBI in this regard are already there. On top of that, if there is a need for any other directions, if it is felt, then we will never fall behind in that.

Ekta Suri, Zee Business:
Can I continue one more? Sir, because it was a big bank, you also gave a statement that, the bank is stable here. But, if it was a small bank and out of fear people would have gone to withdraw their money after the resignation of the Chairman then there would have been an unstable situation. So, I had a question, that, if anyone wants to resign, then so be it. But, on emotions, talking in circles, lowering the value of the share, putting this mistrust in my mind, that my money is safe or not - what will you say on that?

Sanjay Malhotra:
Look, as I said, I am not going to talk about a specific bank, or a particular statement. I will say that whatever the law is, it is very clear. And as of today, we do not feel that there is a need for any change in that. If there is, then definitely, we will think about it.

Brij Raj:
Thank you, Sir. Sir, we now take a few questions from the right side. I will request Ms. Sangita Mehta from The Economic Times to ask her question. Sangita, please.

Sangita Mehta, Economic Times:
Sir, what is the crude oil price assumption that RBI has taken to arrive at the inflation projection of 4.6%?

Sanjay Malhotra:
For this year, $85 to a barrel.

Sangita Mehta, Economic Times:
For the full year?

Sanjay Malhotra:
For the full year on an average, $85. And next year is I think $75. $75.

Sangita Mehta, Economic Times:
And Sir, how long is your assumption of the crisis to last, West Asia crisis? Because one of the comments which is there...

Sanjay Malhotra:
It is very difficult, you know. There is no assumption that what feeds into is the price. The price is more important for us and some of the supplies, some of the critical supplies. And the war, actually it is more, the supply disruption. The war, you are aware, that the Ukraine war is going on. But one can’t say that it is having no impact, but it is having negligible impact. So, what is important is that how long, what are going to be the prices of some of these commodities, which are important for us, especially energy. And what is also important is how long this supply disruption is going to be there. It is very difficult to say so. Now, there is an announcement that the Strait of Hormuz, for example, will be opened.

Sangita Mehta, Economic Times:
Because one of the comments, in the Statement you have said, i.e., initial supply shock can potentially transform into demand shock over a medium term, if the restoration of supply chain is delayed. So, this medium term is referred to what time frame?

Sanjay Malhotra:
This will be many months. Many months.

Brij Raj:
Thank you, Sir. I will request media participants to please stick to one question so that everyone gets a chance. I will now request Jaspreet Kalra from Thomson Reuters to ask his question. Jaspreet, please.

Jaspreet Kalra, Thomson Reuters:
Quick question on the FX side, the measures that were taken. Of course, they have helped stabilize the rupee and the arbitrage positions that you highlighted. In some corners of the market, especially amongst foreign investors, it is also been interpreted as a soft capital control with more could be coming down the line that could hurt returns. And they have also raised concerns about how it makes it harder for them to hedge their currency exposures in the local market. When you take these measures, what sort of impact assessment is done on that level? And has the RBI reached out to or communicated with any investors to reassure their concerns, or do you plan to do that?

Sanjay Malhotra:
No, see, that is what I just mentioned, that these are specific to the market movements that we observed. These are not structural changes. We stand committed. I am repeating, I don't have more to add unfortunately to what I said, but I will still repeat, which is that we stand committed to the further deepening, widening of these markets and the further internationalization of the rupee. These should be seen as actions which help, I would say, in better market development, because this we found was quite speculative and in some sense bordering on speculation leading to higher volatility. So, that is why these measures have been taken.

Sanjay Malhotra:
You [DG (TRS)] want to add, anything?

T. Rabi Sankar:
Yes, I mean, these measures have to be seen in the context of this event, this episode, which, as most of you probably know already by now, was leading to disruptive volatility. More importantly, this was leading to an artificial drying up of supply in the market, which was affecting prices.

Although the transactions were arbitrage transactions, they were affecting local prices. So, our objective of doing this was to cool that phase down. So, the long-term commitment still remains to rupee internationalization, to having one global market and all that. On the issue that you raised, whether foreign investors can hedge here, nothing has been done which disables them from hedging. They can all hedge. So, those things are also well in place. We will look at how the market responds to this.

You would see that we initially just announced that these positions need to be wound down, by limiting the position. Then we studied the market behavior, and we understand that in a market, market makers or authorized dealers have a privileged position. And they behave responsibly. We have seen how much they have added to the depth. Sometimes you get carried away. So, we thought an indication should quieten things down. We did not see that. We saw that these positions were being assigned here and there.

So, we took the remaining measures to contain those. This is a very specific measure that is intended to contain this particular episode.

Brij Raj:
Thank you, Sirs. I will now request Ankur Mishra from ET Now to ask his question. Ankur, please.

Ankur Mishra, ET Now:
Continuing with the same topic, many of the banks have been complaining about MTM losses due to the measure which you had taken. I want to understand when you see particularly, when we spoke to the market participants, they also mentioned that till 2020, NDF view was different for Reserve Bank of India, and it later got changed. Now, if you are saying this is specifically to arrest the rupee volatility, is it a fair understanding that in very near term once you can see the currency stabilizing or the limit, may be once more revised, based on the situation and also, I mean the NDF view, remains the same from Reserve Bank of India, also today you have announced about the IFR requirement of the banks, wanted a little more elaboration on the thoughts behind that.

Sanjay Malhotra:
So, first question, I think we have answered. Only repeat that, this was in response to this particular episode this is not permanent or structural. So, going forward, we will see how the markets are behaving and appropriately a call will be taken, at an appropriate time, to review them. Second question, IFR, I will request DG Swaminathan to throw more light on it. Basically, changes in the investment, like now the bond yields are very high and sometimes they can go up, they can go down and so that has implications for their profitability then the banks come back to us saying, please allow us to stagger these losses. So, we had come out with the concept of an investment fluctuation reserve which to some extent mitigates, but then we feel that the mark to market prices should be factored in because that's the correct position of the banks and so, that's why if they price it as per the markets then the very need of this fluctuation reserve goes away.

DG (SJ) can probably throw more light on some of the historical details of why this was first introduced and removed and then again, it was brought in.

Swaminathan J:
Now, as Governor earlier mentioned also. This had a chequered history, it was introduced in a certain context to be drawn, reintroduced and there was also a lack of harmony across the bank types, different banks had different guidelines that were applicable to them. Essentially, it was required or thought to be relevant because it is better to keep some reserves in good times. So, this was to be created as a ‘below the line’ appropriation item out of the profits, that would have been, generated during the year by sale of investments so that it can be used up when it is necessary.

Subsequently, two significant developments, one is that in terms of our capital adequacy norms, guidelines have been completely revamped and also that as you are aware, two years ago we issued comprehensive guidelines in terms of valuation and disclosure of valuation of investment book. So, having implemented that, this IFR is considered no longer relevant, it does not in any manner change the value at which investment book has to be reflected in the accounting books and also it does not change the profit calculation in any manner, this was an appropriation item considered no longer relevant in the given circumstances. So, has been done away with, more in the nature of a simplification.

And third thing is that there was also a different level of compliance across the banks - it was not uniformly complied with as well and there were supervisory observations arising out of difference in compliance levels. So, by removing that particular requirement, we are making it little more easy in terms of complying with the applicable norms. So it is, at this point in time, considered no longer relevant. Maybe we can offline clarify to you more in detail.

Latha Venkatesh, CNBC-TV18:
So, will removal of IFR have any impact on banks’ profitability?

Swaminathan J:
No because this was a below the line appropriation item. So, it would not have made a significant difference.

Ankur Mishra, ET Now:
The IFR requirement earlier was 2%?

Swaminathan J:
Requirement was 2%. Yes.

Brij Raj:
Thank you, Sirs. I will now request K. Ram Kumar from Hindu Business Line to ask his question. Ram Kumar, please.

K. Ram Kumar, Hindu Business Line:
Thank you. Are you seeing any kind of signs of incipient stress build up with the banking system because of this supply chain disruption, high energy prices and weak external demand? And another question is about whether the transmission of the earlier rate cuts is complete into the lending rates and deposit rates? Thank you.

Sanjay Malhotra:
So, insofar as from the bank side, we are not seeing any systemic concerns, with regard to their profitability and their health. Yes, there will be pockets, there will be sectors which will be hit because of the present crisis. Again, it will depend on the extent. The government has done a wonderful job as of now in trying to secure these inputs and reduce the supply chain disruptions.

It will all depend on how long this continues. In the meanwhile, you are aware that we have already extended the time limit for enhanced export credit to 450 days for all disbursals made till March 31, 2026, to June 30, 2026. We will see going forward but as of now there is no systemic risk.

What is the second question? Transmission? I think this is there in my statement as a footnote perhaps, against 125 basis points, about 90 basis points is the transmission that we have seen on the lending side. Similarly on the deposit side, it is more than 100. So, there has been good, satisfactory as I mentioned transmission.

Brij Raj:
Thank you, Sir. I will request media persons to please stick to one question. I will now request Piyush Shukla from NDTV Profit to ask his question. Piyush please.

Piyush Shukla, NDTV Profit:
Good afternoon. Governor, DGs. Thank you, sir. Sir, one payments bank CEO was jailed and he has been released and the bank is in transition to a SFB. Does this development affect their SFB? We have given an in-principle approval to them. Does this affect that progression? Has the bank sought reappointment of the CEO, has the bank sought that? Also, in terms of the upper layer category of NBFCs, when will be the next list be updated and will Tata Sons be a part of it?

Sanjay Malhotra:
See, regulated entities specific questions, we don't answer. The next list, we are coming up with a new framework for the NBFCs very soon, you should see that. New framework for categorization of NBFCs into Upper, Middle layer, etc. You will see.

Piyush Shukla, NDTV Profit:
Sir, this payments bank has received in-principle approval for conversion to a SFB. Since it is a KMP - Just some clarity, whether this affects that?

Sanjay Malhotra:
I am sorry, specific-bank questions, we don't answer.

Piyush Shukla, NDTV Profit:
That will be a draft now or final circular that NBFC one?

Sanjay Malhotra:
Generally, we do a draft. I mean in this case, we will take a call.

Brij Raj:
Thank you, Sir. Sir we will take now take some questions from the left side. I will request Falaknaaz Syed from Deccan Chronicle to ask her question. Falaknaaz, please.

Falaknaaz Syed, Deccan Chronicle:
Sir, is this growth assumption of 6.9%, isn’t it too optimistic, given that supply chain normalization especially gas supply takes quite a long time and it will have ramifications outside the supply. Also the (price) level of oil that we will have will be higher than when the war started. So, isn't this growth projection too optimistic?

Sanjay Malhotra:
No, we don't think that it is too optimistic. However, we have mentioned that there are more risks to the downside rather than to the upside and that would happen primarily I would say for the reasons that you are mentioning that there is prolonged disruption in the supplies which we hope should normalize sooner than later that can put pressure on the assessment of growth of 6.9%. This is a reduction, in comparison to last year of about 70 basis points. So, it is not small.

Falaknaaz Syed, Deccan Chronicle:
Okay. Sir, do you have and can you share data on the last seven months - seven months back you had launched the unclaimed deposits scheme wherein banks were given a kind of incentive.

Sanjay Malhotra:
We will give the data. I do not have it offhand. You [ED (RLKR)] have some data? Why don’t you give it?

Falaknaaz Syed, Deccan Chronicle:
Sir, last seven months how much amount has come back to the depositors?

R.L. K. Rao:
There were two events. One is the ‘आपकी पूँजी, आपका अधिकार’ campaign was there for three months from October to December (2025) by DFS, Government of India and also, RBI. So, that led to a lot of unclaimed deposits being returned to the claimants. And also, we have come up with incentive scheme to the banks. So, that also helped. It's around the same time. So, both these initiatives actually led to lot of returning of the amounts. I can tell you the figures. So, average earlier from April to September 2025, average refunds were around ₹180 crore. Now post this campaign that is from October, till now the average has gone up to ₹760 crore per month. So, to that extent it's quite a jump. And even incentive also, around ₹600 crore, we are paying to the banks for doing aggressive tracing of the customers and then returning the amounts. So, these are the figures (Per month average monthly claims).

Brij Raj:
Thank you, Sirs. I will now request Krishn Kaushik from Financial Times to ask his question. Krishn please.

Krishn Kaushik, Financial Times:
Good afternoon, Sir. So, I want to ask about the foreign exchange reserves. There is a drop of about $40 billion over a 5-week period since the conflict started. And the FCA is down to about $550 billion at an average of 80 billion per month of import that covers like 7-month import. So, at what point does it start becoming a concern for you?

Sanjay Malhotra:
We have sufficient forex reserves. It’s not a matter of concern for us at all. 11 months of cover is what we have if you look at, I mean that's the standard metric. This is sufficient. Government has taken a number of measures. We believe this year minus the war would have been much better. With the war, had some pressure as I noted even in my MPC statement. But on the capital account side, even on the current account side, a lot of these agreements that have come in place - major economies, EU should also get implemented, hopefully soon, UK is already in place, other economies - Canada is in pipeline. All of them should help us both on current account and capital account.

Similarly, a lot of investments coming in, you saw it in the financial sector, in tech sector - a lot of announcements on FDI. Gross FDI is doing very well. Almost 20% - 18% to be precise is the growth till February. Till February, the growth is $18 billion. Next year, if not this, we should touch hopefully $100 billion. I don't expect repatriations to have the same accelerated growth because of how equity valuations are today. Similarly, ODI, looking at the overall uncertainty in the world. So, capital account seems very robust, current account seems to be quite manageable. So, I am not at all concerned with the BOP position of our country.

Krishn Kaushik, Financial Times:
But Sir the net FDI is quite low annually, even the FII outflow has been quite high, about $12 billion in the last one month.

Sanjay Malhotra:
Yes. So as I mentioned, this year, we expect the repatriations to slow down, the ODI also to kind of remain the same or slow down. Gross FDI to continue growing. And so, as a result not only gross, we made an improvement even this year in net FDI. It's about $5-$6 billion by the time we end the year we will have the figures. It's better than last year. Last year is better than the last-to-last year and this year should be much better than last year. FPI outflows also to the extent that we have seen last year. It's mostly on the equity side and we are hopeful that we should get good flows on the debt side and not so high outflows as last year on the equity side.

Manojit Saha, Business Standard:
BOP is expected to be in deficit for the third consecutive year, current account deficit is also widening. All these are seen as reasons for the pressure on the rupee. You are essentially ruling out any schemes for attracting inflows?

Sanjay Malhotra:
No. I am not saying that. I think we do need to continue the good work that has been done on both the current account and on the capital account. And that makes me confident that the BOP position should going forward improve. Last 2 years and even this year especially because of this shock and elevated oil prices, the deficit we may have, it's not certain, we don't know as of now, 2 years certainly it has been in deficit. But the government has taken proactive measures. And if anything, going forward I am confident that this will only improve and help us improve both our current account (and capital account). As they say, never, let a crisis go waste. This was almost a crisis. And so, going forward this will only help us in pointing out some of the areas that we need to improve. Self-sufficiency in oil is something that we need to work on, the government has taken proactive steps. Production of oil and gas has been ramped up.

Then there are measures - there will have to be an accelerated adoption of EVs; accelerated renewable energy, etc. all these things, which the government is already doing, need to ramp these up, so that, imports, we get more self-sufficient on oil. The import burden reduces. Exports, government is already proactively looking at expanding through various schemes and through various FTAs and through the domestic manufacturing programs. And so, the current account and similarly on the capital account, a lot of work that needs to be done. I think, this is an opportunity for us to recognize this and continue to accelerate some of the works which have been in the pipeline to improve our BOP position.

Latha Venkatesh, CNBC-TV18
No special FCNR(B) for NRIs?

Sanjay Malhotra:
These are specific things. These are temporary measures. FCNR(B) is a temporary measure, these are not structural changes. I was more talking about the structural changes, which are important, and which is this kind of a hopefully, a near-crisis only helps us to recognize and fast track some of the work that has already been underway for quite a few number of years now.

Brij Raj:
Thank you, Sir. I will now request Ben Jose from The New Indian Express to ask his question. Ben, please.

Ben Jose, The New Indian Express:
Thank you, sir. This is again, about the FPI sell-off and volatility in the rupee. The FPIs say that they are selling out because rupee is falling. And forex traders say that rupee is falling because FPIs are selling. Is there a structural issue that the rupee faces? Because FY25, we were the worst Asian currency; FY26, we were the worst Asian currency. If you take out the March depreciation because of the Iran war, again, we lost more than 5%. So, is it a minus BOP for the third year or increasing CAD for the third year? What is the structural issue, that, okay, at least the funds are selling out? Foreign funds, Sir, investors, foreign investors are selling our equity and the debt.

Sanjay Malhotra:
You have to ask them. As I mentioned to you, the macroeconomic fundamentals of the country are very strong. FPI flows are volatile. They will see where they can make short-term money and they will flow into those pockets. It is not only India that they are looking at, they are looking at various jurisdictions; over a shorter horizon than the FDI. And so, I think it’s only a matter of time that whether it is FPI or whether it is FDI, both should come to India and be part of this growth story.

I think, as I have mentioned earlier, India’s macroeconomic fundamentals are on a very, very strong wicket for a number of reasons. Because of the policies, because of the demographics, because of the urbanization, because of the financial conditions that are there, the stability that we offer - it is a matter of time that those people who want to make, those who are patient, those who want to make long term money, they will certainly come to India. Those who are in for a quick buck, they will come and go.

Ben Jose, The New Indian Express:
Thank you.

Brij Raj:
Thank you, Sir. I will now request Lalatendu Mishra from The Hindu to ask his question. Lalatendu, please.

Lalatendu Mishra, The Hindu:
Thank you, sir. Good afternoon, Governor. It was a sleepless night. I don’t know whether you or the MPC members felt the same, till this gentleman tweeted that he has stopped the war for the time being. My question is about the remittances, Sir. There are concerns that the remittances have come down. What you have seen in the month of March and if you can put it into perspective, Sir, how important are the remittances from the Western Asia countries?

Sanjay Malhotra:
Madam [DG(PG)], you want to take this?

Poonam Gupta:
Sure, absolutely. So, our remittances actually come from rather diverse set of regions, in which the share of the Gulf countries has declined over time. When I talk about the diversity, it is not just the geographical diversity, it is also the kind of skill pool we have across different countries. We have relatively low skilled, medium skilled, and high skilled migrant workers, who send these remittances. So, if we look at the past 10-15 years of data, they have moved only in one direction, which is the upper direction. So, we are not anticipating a dent to remittances, especially, given the tweet that you talked about, if the crisis is going to be resolved very soon. We anticipate actually the demand for migrant workers will in fact increase from this region which will help the remittances further.

Sir, with your permission, I will just add to something that the gentleman asked, on the relative attractiveness of India as an investment destination is going to increase this year because of three factors. One is, valuations have become more attractive, you would agree with that. Exchange rate makes investments into the country more attractive and a higher nominal GDP growth will help with earnings as well. So, this year, as Sir said, is looking quite promising on some of these.

Ben Jose, The New Indian Express:
Can I just ask a clarification? The IPO last year was the record, almost ₹1.8 trillion, but almost 65% of the IPO money was the FPOs, which the foreign investors took out. Has it contributed in a way to the capital outflow of the country and adding to the rupee pain and both?

Sanjay Malhotra:
Obviously, see, that is what I mentioned. Because of high valuations or good valuation, whatever way you may call it, lot of money went out in form of repatriations. The equity valuations have now corrected. So, I don’t see repatriations to that extent this year and that should certainly help them.

Brij Raj:
Thank you, Sir and thank you, Madam. I will now request Nachiket Kelkar from Business Today to ask his question. Nachiket, please.

Nachiket Kelkar, Business Today:
Good afternoon, Governor. One step that you have announced today is the comprehensive review of directions to how bank boards operate. So, what prompted that and when we are talking about bank boards, we keep talking about the issues with private sector banks, but we continue to see issues with the cooperative banks as well. Every other week, RBI keeps on penalizing some or the other cooperative bank. Is there something that the RBI plans with respect to that as well or maybe more regulations or whatever?

Sanjay Malhotra:
Two things see. One, it is important to review these things over a period of time. Because, when one is issuing an instruction, one is not looking at it comprehensively. So, if you are issuing an instruction relating to a loan product, you give some instructions relating to the responsibilities that the banks should have. Similarly on the capital side, on the risk side, on the prudential measures for various aspects and you have a number of circulars. On each circular you prescribe the duties for the board.

When you are doing that, you are looking at only that individual circular or direction, without realizing as to what the overall ask is from the bank boards and how much pressure it puts on their time and so, that is why it is important to review them. One had been hearing from the boards that a lot of operational matters also are coming to the bank boards, as a result of which they are not able to concentrate on real policy and strategic matters. And so that is why, that is the second reason why we have brought this in.

Nachiket Kelkar, Business Today:
Sir, on cooperative banks?

Sanjay Malhotra:
See, similar regulations are there for cooperative banks also. Similar kind of regulations will be there for cooperative banks. It will cover the entire sector, all segments of the banking sector. Of course, the regulations and the requirements for different segments will be different.

Brij Raj:
Thank you, Sir. Sir, we will now take a few questions from the right side. I will request Mayur Shetty from The Times of India to ask his question. Mayur, please?

Mayur Shetty, The Times of India:
Thank you, sir. Governor, in the past crisis whenever the RBI took extraordinary measures to contain rupee volatility, it was invariably followed by some monetary tightening. This time you said that the crisis is different, India’s macroeconomic situation is very strong. So, does it mean that you don’t see any tightening requirement, if there is any fresh bout of volatility?

Sanjay Malhotra:
See, this, as has been mentioned, this measure that we took with regard to the foreign exchange markets was with respect to the specific developments. It is not a structural change or a structural shift, on the one hand of our policy, and at the same time on our view on the rupee. So, it will not be fair to compare this measure which some of the periods that you are comparing with.

Brij Raj:
Thank you, Sir. I will now request, Subhana Shaikh from Mint to ask her question. Subhana, please.

Subhana Shaikh, Mint:
Good afternoon, Governor. Governor, I wanted to ask the measures on the rupee that you had taken very recently. Those were quite decisive measures. Is there a similar intent to address such speculative flows in the overnight index market as well, in the interest rate derivative markets as well. Because, there has been a growing presence of offshore hedge fund flows there and that has also been impacting the G-Sec market, as well. I mean, OIS is now expecting, three to four rate hikes this year. So, any intent or any measures to moderate flows there?

Also, is over 7%, 10-year G-Sec yield, is the RBI comfortable with that? And one last, Sir, last time you had mentioned that 2% to 3% depreciation in the rupee is expected in any financial year. This year, we have seen quite a lot of depreciation; 11% in FY26 and so far, 5% since the war, has begun.

Sanjay Malhotra:
Many questions, you know?

Subhana Shaikh, Mint:
So, how comfortable are you with the rupee depreciation in FY 27, Sir?

Sanjay Malhotra:
See, what I mentioned was, let me correct you, that 2% to 3% is the average depreciation. I did not say, please, that this is something that I expect. There have been years when we have depreciated much less. There have been years when we have appreciated. So, it is not to say that every year there will be a depreciation of 2% to 3%, that is the average. The average is about 3-3.5% and so, that is just the average depreciation. OIS is a very, very thin market. It is a very thin market, not much should be read into it, is all I would say. Not 3, 4, 5, whatever cuts, it is a very thin market, please don’t go by it.

You asked comfort, where the comfort is. See these prices are determined whether it is the forex markets whether it is the bond yields, etc. these are determined by the markets. We have deep markets for the government bonds, some of the benchmark government bonds, and we let the markets determine their prices. I think, I remembered and answered all your questions.

Brij Raj:
I will request media persons to please ask only one question. Thank you, Sir. I will now request Ms. Sweta Roy from The Banker, FT to ask a question. Sweta, please.

Sweta Roy, The Banker, FT:
Hello, Sir. Sir, I wanted to understand, although we are hearing a lot of reports about the temporary ceasefire that is happening right now. But the supply chain disruptions that are already done and are going to likely last for a few months. I want to understand in this context how is RBI going to maintain stability, going forward?

Sanjay Malhotra:
I did not, sorry, get your question. How do we maintain the stability?

Sweta Roy, The Banker, FT:
How are you going to maintain stability going forward given the environmental stress right now? Even though, because it is a temporary ceasefire that we are looking at.

Sanjay Malhotra:
Yes, so we are alert all the times and whatever needs to be done, whether it is forex market, Government securities markets, banks, financial institutions, NBFCs, monetary policy, we are alert. I want to assure you. Financial stability is the first objective, the primary objective for us followed by price stability and growth. We continue to do whatever is required in the best interest of the economy and ensure financial stability.

Brij Raj:
Thank you, Sir. I will now request Shyama Mishra from Doordarshan to ask her question. Shyama, please.

Shyama Mishra, Doordarshan:
Namaskar Sir. Sir, now we are seeing this is a two weeks ceasefire. What if tomorrow things stop? According to this, if we look at it, if tomorrow, things are normalized, still in our country, in this economy how long will we continue to see the effect? And how long will it take for things to normalize?

Sanjay Malhotra:
Look, there is a lot of uncertainty. I will not be able to give you an answer to this question, because we do not know that. Suppose the ceasefire is over and the war is over and the Strait of Hormuz opens, as it has been announced, it will open. We are hopeful for that but how much damage has been done, we do not know. How much time will it take? Some facilities have been shut down in Gulf. How long will it take to reopen them, this also we are not aware of. So, to say this today is not possible.

But what our assumption is, we have given you the statistics taking everything into consideration. We have given you our best estimate and we expect the situation will be better than that if this ceasefire happens and the disruption that has happened and the supplies are restored back completely, then we should get better statistics in growth and inflation due to it.

Brij Raj:
Thank you, Sir. I will now request Mahesh Nayak from Financial Express to ask his question. Mahesh, please.

Mahesh Nayak, Financial Express:
Thank you. Good afternoon, Sir. In the past few days, we saw the weighted average call rates going below the SDF. Will RBI, and this month we see sufficient liquidity, if the rates fall below the SDF, are we going to see any deployment of VRRR? And second is, what is the view on gold prices, which is internationally being very, you know, is, do you see it being too euphoric and impacting also the Indian domestic market?

Sanjay Malhotra:
View on gold? I do not have any view on gold. Forex reserves, we maintain part of it in gold, but we do not have a view on gold as to how, you know, it is going to play out.

Your first question was VRRR. See, we have been on record. We have said that these are two different things, and it is quite possible, VRRR and the durable liquidity that we provide, they are two different things to address two different issues. One is durable, the other is transient. Our attempt, of course, is to keep the WACR as near as possible to the policy rate. However, at times like this, you know, when there is so much of an uncertainty, we want to give the comfort to the banks that liquidity will not be in deficit. And so that’s why, we have allowed it to be in the lower end. So, it is still within the LAF, it’s not outside the LAF. And it is only to give them the comfort. It is not any signal for a rate reduction or anything, that should not be taken as that. And we do not know what will happen tomorrow, you know, we cannot say. But as I have stated, we will give sufficient and proactively and pre-emptively whatever liquidity is required to the banks for meeting the needs of the banking system.

Brij Raj:
Thank you, Sir. Sir, we will take the remaining questions from the left side. I will request Ashish Agashe from PTI to ask his question.

Ashish Agashe, PTI:
Thank you so much, Sir. Sir, there have been these reports about some relief packages coming from the government side. So, have there been any conversations? What would be RBI's prescriptions really, maybe targeted help to some sectors or something which might be in the works? Also secondly Sir, how does RBI look at the farm loan waiver announcement done by Maharashtra, given the entire focus on credit culture preservation perspective from that lens, Sir?

Sanjay Malhotra:
See for the first question I will only say that we will not be found wanting, as has been the case, as has been our history, you know, going back to COVID or later the Ukraine war and recently, this particular war, the trade related uncertainties, etc. Whatever is required, we will do that. Waivers, loan waivers, which have been announced by certain governments, we always, we are of the view that generally, you know, loan waivers, if they have to be there, they should be targeted. There should not be a general kind of a loan waiver. But if there are circumstances which merit because of any natural calamity or distress, in those kinds of times, there are relief measures which are announced. We have a framework, in fact, for such kind of reliefs to be accorded in consultation with the banks.

Brij Raj:
Thank you, Sir. I will now request Saurabh Pandey from IANS to ask his question. Saurabh please.

Saurabh Pandey, IANS:
Good afternoon, Governor. Sir, first of all, the trend that we are seeing nowadays, we are marching towards AI rapidly. For the AI driven financial services that we have, are we planning to bring in any framework to regulate them? And the second question is, what is the status of our digital rupee CBDC, till when will we able to see the rollout and adoption of it? Or are we still seeing it in the traction and experiment phase only till now?

Sanjay Malhotra:
You [DG(TRS)] want to take this?

T. Rabi Sankar:
CBDC is an innovation, whose time has come. This is the future of payments, but there is a right time to go, to launch it. And we have said this earlier also, that the right time does not depend only on how much ready we are, in terms of our infrastructure and our policies and our systems, but how much are the other countries ready for it because CBDC's biggest advantage is in the cross-border (payments) sector. So, if you launch it quickly, and the other country has not launched it, you cannot establish a cross-border that is not a situation we want to be in.

Which is why, as we have been saying earlier also, we are gradually moving, getting the technology right, getting the use cases right, like nowadays for many governments, this is being used for direct payments, so all that we are doing. Programmability, which is the distinguishing feature of CBDC vis-a-vis other payment instruments, we are developing programmability, all those processes are going on. As far as users are concerned, they are increasing gradually, now there are 1 crore users, there have been nearly 15 crore total transactions of about ₹34,000 crore, they are growing rapidly but there is no urgency that we should launch it now only, that is as far as CBDC is concerned.

AI status is that now AI usage that is going on at present, from our end, from FinTech development perspective, we are focussing on this only that all its users should get the Sandbox. So, we are thinking of an AI sandbox where they will get curated databases, where they can test, they can train, our focus from FinTech is towards that only. There is no regulation of AI sector as such. Our regulatory approach has been that we will take SRO based approach in technology sector so that we can talk to each other constantly. Thank you.

Saurabh Pandey, IANS:
Sir, you talked about AI sandbox. Can you tell us more about that?

Sanjay Malhotra:
We will tell you separately offline.

Brij Raj:
Thank you, Sir. I will now request Akash Mandal from Indian Express to ask his question. Akash, please.

Akash Mandal, Indian Express:
Good afternoon, Governor. Sir, you referred to our macroeconomic fundamentals remaining relatively strong, resilient, despite the risks posed by the West Asia conflict. Do you see the credit growth across the banking sector being significantly affected if the conflict prolongs, especially because it has been on an upward trend recently? So, do you see any significant downward risk there?

Sanjay Malhotra:
No, I don’t see a significant risk. It has been growing. Certain sectors may be, but it is very small. Overall, I think, because especially retail, services, even agriculture, etc., all sectors, MSMEs, strong growth, we expect this growth to continue.

Brij Raj:
Thank you, Sir. We will take the remaining questions from the right side. I will request Aaryan Khanna from Informist Media to ask his question. Aaryan, please.

Aaryan Khanna, Informist Media:
Thank you, sir. Good afternoon. I wanted to take this opportunity to ask a broader monetary policy question, which is, in terms of FY 26, we have had a lower rate of CPI headline inflation. Does that give you comfort that you can see through a supply shock or a shock on higher inflation in the first half or even the second half of FY 27 as you are projecting? And then also, do you see monetary policy as a tool for macro financial stability, for example, in the case of CAD being under pressure maybe during the year later on? Thank you.

Sanjay Malhotra:
See, we have given our projections for CPI already, quarter-wise, we have given that. So, that has taken into account not only what the inflation was or is, was last year or is now, and what is the outlook. So, whatever we wanted to say is there in terms of the numbers, everything is given over there. Whether monetary policy is a tool? Theoretically, yes, it is. Theoretically, yes, it is a tool. I mean, because financial stability is the bedrock. But the question whether it’s time to use it, that is a different question. That is a different question. We do not think, as of now, there is a use case. But yes, monetary policy is certainly to be used in providing financial stability.

Aaryan Khanna, Informist Media:
So, just to clarify my first question, it was not on the projections. But considering that inflation is at, say, 2%, 2.2% for FY 26, so as policymakers, does that give you a bit more time to act, as you have been saying earlier that it has been giving you time to cut, is giving you room to cut? So, does it give you time to act in case you need to hike rates later on in this year?

Sanjay Malhotra:
The present, does it have an implication for the policy? I mean, yes, it does have some. See, we are forward-looking, as we say, in monetary policy, right. We do say. And that is how it is, because we have to act, because monetary policy acts with a lag. So, yes, while it is forward-looking, but to say that the present does not have any context and any meaning, no, because what the present is, what the future is, is still a forecast. The present is actual. So, it does have implications.

Brij Raj:
I will now request Saurav Mukherjee of ANI to ask his question. Saurav, please.

Saurav Mukherjee, ANI:
Sir, thank you for giving me the opportunity. I have only one question for you, Sir. With surplus liquidity but rising deposit rates due to high credit deposit gap, how does the RBI assess monetary policy transmission? Especially, what are the further liquidity measures planned? Thank you.

Sanjay Malhotra:
You see, it is there in my Statement. And I also mentioned, we will provide whatever liquidity is needed for the banking system proactively and preemptively. Thank you.

Brij Raj:
Thank you, Sir. I will now request Jeevan Bhawasar of Akashvani to ask his question. Jeevan, please.

Jeevan Bhawasar, Akashvani:
Namaskar, Sir. Sir, due to the West Asia conflict, the people who are in distress, the government is planning various measures, various packages or incentives are being given. So, is RBI preparing something or has RBI planned something?

Sanjay Malhotra:
As I said, we have already taken one measure, which is in relation to pre-shipment and post-shipment credit. We have already implemented it. And whatever is needed, we will definitely study it carefully and implement whatever measures are needed.

Brij Raj:
Thank you, Sir. I now request Shri Soumyajit Saha of Nikkei to ask the final question of this press conference. Soumyajit, please.

Soumyajit Saha, Nikkei:
Thank you for the opportunity, Governor. So, by chance, RBI has become the first major central bank to give out a policy decision right after the ceasefire. So, we were looking for a wider comment. So, this is a two-parter. The first thing we wanted to get from you is if you have an opinion on what the ceasefire means for Asian and emerging markets economies widely, if you would like to give a wider opinion on that. And the second part is because even you have mentioned this many times, including in today's Statement, that India is better placed compared to some of the other economies when it comes to shocks like tariffs or the crisis that we are still going through broadly. Could you elaborate on that a little bit more? What are the advantages and how you are coming to that kind of a statement?

Sanjay Malhotra:
So, I mean, obviously, no war is good for anyone, other than may be the defence manufacturers or like. So, the war is not good. So, it is certainly for everyone, the ceasefire, hopefully, it becomes permanent, it’s good. We are all aware. Second question, we are all aware. Some of it was also alluded to by Aaryan, I think, on the inflation, for example, being very low, growth being very robust, the financial institutions, the corporates, the government balance sheets being very healthy vis-a-vis some of the other countries' government balance sheets. The policies that we have in place, the institutions that we have, whether it is in terms of the inflation, monetary policy, inflation targeting, the policy that we have for forex, the reforms that are being undertaken continuously by the government, a number of them I can mention as a result of which we are better placed than some of the other economies. That can be a topic in itself.

Ben Jose, The New Indian Express:
Whether the MPC re-assessed the previous day’s decisions after the two-week truce announcement in the wee-hours of Wednesday?

Sanjay Malhotra:
We do meet before this, I mean, before the monetary policy. And the ceasefire, to some extent, has been taken into account. The whole implications, you know, we will come to know. But the ceasefire has been taken into account in the monetary policy decision.

Brij Raj:
Thank you, Sir. With your permission, Sir, we will now conclude this press conference. I would like to thank you Sir, and our Top Management for patiently answering all the questions and for making this interaction so engaging and interactive. I also thank all members of the media for their participation and wish you all a pleasant day.

Thank you very much.

Sanjay Malhotra:
Thank you.

Dr S. Vaidhyasubramaniam, Vice-Chancellor of SASTRA University, Shri G. Mahalingam, Chairman of the Board of City Union Bank, Dr. N. Kamakodi, MD & CEO, City Union Bank, distinguished guests, esteemed faculty members, staff and dear students, ladies, and gentlemen. A very good morning to all of you.

2. It is indeed an honour to deliver the Shri V. Narayanan Memorial Lecture at SASTRA University. This lecture series is special because it commemorates not merely an individual, but a rich tradition of banking exemplified by him.

3. Shri V. Narayanan is remembered as a transformational leader of City Union Bank, founded in 1904 in Kumbakonam, a town with which I, too, share a personal connection. Often described as a ‘statesman banker’, he combined institutional vision with personal warmth, prudence with progress, and ambition with rootedness.

4. Under his leadership, City Union Bank grew from a largely regional institution into one with a wider national presence. He invested in staff development, strengthened systems, strongly supported small and medium enterprises, and brought technology into banking, ahead of its time.

5. Yet, even while embracing change, he never allowed banking to become impersonal. That, to my mind, is what makes his legacy so relevant to our times.

6. We are living through another moment of profound change in finance. Artificial Intelligence is beginning to reshape how financial institutions serve customers, process documents, assess credit, monitor risks, and strengthen oversight. The speed of that change is remarkable. The real question before us is not whether finance will become more intelligent but whether it will remain fair, accountable, inclusive, and humane.

7. That is why I felt it appropriate to speak today on the subject: AI in Finance: What can change, what must never change. It is a fitting theme for this occasion.

8. It is fitting, first, because SASTRA has been consciously building capabilities in this space through collaboration, research, and practical engagement. That is both timely and important. As a country, we will need our own talent, our own institutional capacity, and our own ethical judgment to design, test and govern AI systems suited to our economy and society.

9. It is fitting, second, because Shri V. Narayanan, in whose memory we gather today, believed in the responsible use of technology and in ensuring that progress remained anchored in sound judgment.

10. The responsibility of institutions such as SASTRA, therefore, is not merely to produce engineers and professionals, but to help shape responsible builders of the future.

Opportunities in AI

11. Let me begin with the promise that AI holds for finance. At the outset, however, let me clarify that this lecture is not intended to be a technical exposition, for which this University undoubtedly has ample talent. I propose instead to reflect on the broader questions that AI raises from the perspective of a financial sector practitioner.

12. Finance, at its best, reduces uncertainty and expands opportunity. It helps households save, businesses grow, farmers invest, students pursue their aspirations, and entrepreneurs dream a little bigger.

13. Yet finance also has its barriers. It can be overwhelming, documentation-heavy, language-bound, and at times physically distant. In a country as large and diverse as India, technology can help reduce many of these frictions.

14. AI-enabled systems can make customer interaction simpler, more intuitive, and more responsive. Multilingual chatbots and voice-based interfaces can help customers who are not comfortable with formal paperwork or English-language interfaces. Routine queries can be answered faster. Complaints can be tracked better. Information can be delivered more clearly. For many people, that can make the difference between formal finance feeling accessible and alien.

15. AI can also help improve credit delivery. Traditional finance has relied on collateral, financial statements, and standardised credit templates. These remain important and will continue to matter. However, they do not always capture the full story of a borrower, especially for small businesses, informal enterprises, first-time borrowers, and others with thin formal credit histories.

16. Used responsibly, AI can supplement traditional methods by drawing insights from a wider set of patterns in transaction behaviour, repayment flows and business activity. This can help identify viable borrowers who might otherwise remain excluded. For a country committed to inclusive growth, this is a significant opportunity.

17. AI can contribute meaningfully to fraud detection and risk management as well. Modern financial systems generate vast quantities of data. AI can help identify unusual patterns, flag suspicious activity and support faster intervention. This is especially important in payments, where public confidence depends on both convenience and safety. In this sense, AI can contribute not just to speed, but to safety.

18. There is also a role for AI in compliance and supervision. Financial supervision today cannot rely only on periodic reporting and backward-looking assessments. Intelligent tools can assist in analysing large volumes of information, identifying patterns, drawing attention to anomalies and supporting early warning. Used well, such tools can help institutions manage risk more effectively and enable supervisors to focus more on emerging issues.

Concerns

19. So, the promise is real. But, as history has proven, every powerful technology is a double-edged instrument.

20. If AI is adopted without adequate safeguards, it can amplify existing weaknesses and create entirely new forms of harm. Therefore, the conversation about AI in finance must be balanced. We should neither be taken in by technological hype nor retreat into being defensive.

21. Let me briefly highlight five major concerns.

(i) Bias and unfair outcomes

22. The first is bias and unfair outcomes. AI systems learn from data. But data does not emerge from a vacuum. It carries the imprint of past behaviour, existing inequalities and structural exclusions. If these distortions are embedded in the data, they can be reproduced by the model, sometimes with even greater efficiency and scale.

23. In credit assessment, this can create outcomes that are difficult to justify and harder to detect. What appears objective on the surface may, in fact, nurture unfairness beneath the surface. In finance, this is not merely a technical concern. It is a question of consumer protection, inclusion, and equity.

(ii) Black box nature of some systems

24. The second is opacity. Many advanced systems operate like black boxes. They can produce an output, but not always in a way that is intelligible to a customer, a manager or even a regulator. But finance cannot become a black box. If a person is denied credit, an account is frozen, a transaction is wrongly flagged, or a product is incorrectly pushed to a customer, the institution must be able to explain the basis for that decision. A decision that materially impacts a citizen’s economic life cannot be defended by saying, “the machine decided.”

(iii) Data privacy and misuse

25. The third concern is data privacy and misuse. AI systems rely on large volumes of data, and financial data are among the most sensitive forms of personal information. Institutions must therefore think seriously about consent, storage, sharing, access controls and purpose limitation. Data governance cannot be treated as a side issue. In the age of AI, trust becomes central.

(iv) Model risk

26. The fourth concern is model risk and concentration risk. In an earlier era, a weak judgment in one office might affect a limited number of accounts. In the AI era, a flawed model can affect decisions across millions of customers. Further, if multiple institutions rely on similar models, common datasets, a small set of vendors or shared infrastructure, individual vulnerabilities can become correlated vulnerabilities. This is where even a local weakness can acquire broader systemic significance.

(v) Cyber risk

27. The fifth concern is cyber risk. AI can strengthen defences, but it can also equip attackers. Fraudsters and bad actors can use AI to craft more convincing phishing attempts, create deepfakes, probe systems more effectively and automate malicious activity. As finance becomes more digital and more interconnected, resilience becomes even more critical.

Guiding principles

28. What then should guide us, as we set course on the path towards a full-scale AI adoption? In my view, five broad principles should shape the responsible use of AI in finance:

29. First, human responsibility must remain central. AI may support decision-making, but accountability must remain with humans and institutions. A bank or NBFC cannot outsource responsibility to an algorithm, a vendor or a platform. Technology may help process information at speed and scale, but judgment and responsibility must continue to reside where they belong.

30. Second, fairness and explainability must be built into the system from the beginning. They cannot be treated as optional extras. Different stakeholders need different kinds of explanations.

31. A customer deserves a clear and understandable reason for an important decision. Management needs to understand how the model behaves, where its limitations lie and what assumptions drive it. Supervisors need confidence that systems are robust, auditable, and well-governed. The point is not to make every model simplistic. The point is to ensure that it remains understandable at the appropriate level.

32. Third, strong data governance is essential. Institutions must think carefully about the full lifecycle of data: how it is collected, on what basis it is used, how long it is retained, who can access it and how it is protected. Privacy and innovation should not be seen as mutually opposed. The institutions that endure will be those that learn to reconcile both.

33. Fourth, institutional capacity must be strengthened. AI in finance is not only a technology challenge. It is also a governance, capability, and cultural challenge. Boards and senior management need to understand enough to ask the right questions. Risk managers need to know what to validate. Supervisors need the capacity to examine AI-enabled systems intelligently. And universities need to produce graduates who are not only technically competent, but also alive to questions of ethics, regulation and public purpose.

34. Fifth, inclusion must be a design objective, not an accidental by-product. Scale by itself does not mean inclusion. We must ask a harder question: who is still left out? The best innovation is not the one that dazzles those already well served. The best innovation is that which makes formal finance simpler, safer and more useful for those who are at the margins, because of geography, language, literacy, age or income. If AI helps bridge those gaps, it advances inclusion. If it quietly deepens exclusion, we would have failed in its design. As I have said before, inclusion should be innovation’s highest purpose¹.

35. In India, the true value of AI in finance should be judged by three tests.

1. Does it advance inclusion?

2. Does it improve efficiency?

3. Does it strengthen trust?

If it does these three things positively, then it serves a meaningful public purpose. If it does not, then its sophistication alone should not impress us.

Lesson from Shri Narayanan

36. At this point, let me come back to Shri V. Narayanan.

37. Those who knew him recall that he thought ahead of his time. He brought technology to banking earlier than many comparable institutions did. Yet he also retained a human touch, especially in lending relationships with small and medium enterprises. That combination is deeply instructive. He was not choosing between technology and relationships. He was showing how progress and human judgment must go together.

38. One line often associated with him captures this beautifully: “Take care of the bank; the bank will take care of you.” It is a simple statement, but it contains a profound institutional ethic. It speaks of stewardship. It reminds us that institutions flourish when people treat them not merely as sites of transaction or employment, but as repositories of trust. That insight is just as relevant in the age of AI as it was in the age of ledgers and branch registers.

39. The lesson from Shri Narayanan’s life is that technological change in finance must remain anchored in stewardship, trust and responsibility.

40. Banking, at its heart, is a business of trust. A financial institution can survive a difficult quarter, an operational mistake, or even a strategic setback. But it cannot easily survive the erosion of trust. That is why innovation in finance must always remain subordinate to integrity, fairness and accountability.

Role of Students

41. For the students in this hall, this is not a distant issue. By the time many of you are in mid-career, AI will be woven into almost every part of the financial world.

42. I would suggest you learn these tools deeply. Understand the technology seriously. Build technical competence with rigour and curiosity. But more importantly, also carry with you an equally deep commitment to ethics, transparency and public interest.

43. In a world shaped by AI, technical excellence without ethics can do great harm. The real test of your generation will not be whether you can build powerful systems. It will be whether you can build systems worthy of public trust.

44. If India can combine its digital strengths, entrepreneurial energy, scientific talent and institutional wisdom, then we can build a financial sector that is not only more efficient, but also more inclusive, more resilient and more trustworthy. That should be our aspiration. We should not pursue technology for its own sake, but rather use it in the service of people.

45. Intelligence without accountability does no good; it must be guided by sound and ethical judgment. Our endeavour, therefore, should be to foster innovation that strengthens institutions for the long term.

Conclusion

46. Let me conclude with this thought.

47. Every generation receives a few powerful tools. This generation has grown up with digital technology and artificial intelligence. History does not judge societies by the sophistication of the tools they possessed, but by the values that guided their use.

48. If AI helps widen opportunity, improve access, strengthen prudence, protect customers and deepen trust, then it will have served a noble purpose. On the other hand, if it weakens accountability, obscures decisions, excludes the vulnerable or turns finance into an impersonal black box, then it will have taken us away from the ideals that bankers like Shri V. Narayanan stood for.

49. The enduring task, therefore, is to make finance more intelligent, without making it less human; to make it more digital, without making it less accountable; and to make it more inclusive, without making it less prudent. This, in a nutshell, is what can change and what must never change.

50. My heartfelt gratitude to the organisers for this opportunity. I wish SASTRA, its faculty, and its students the very best in all their endeavours. May God guide you and bless your efforts in all that you seek to achieve. Thank you. Jai Hind.

¹ Swaminathan J, “Inclusion is Innovation’s Highest Purpose: Lessons from India,” Reserve Bank of India, October 15, 2025, https://rbi.org.in/scripts/BS_SpeechesView.aspx?Id=1526

Professor Partha Ray, Director, National Institute of Bank Management (NIBM), Shri Jaikish, Principal, College of Agricultural Banking (CAB), distinguished delegates, researchers, faculty, policymakers, industry leaders, colleagues from India and overseas, ladies and gentlemen. Good afternoon.

2. As we come to the close of this International Conference on Digitalisation for Inclusive Finance and Sustainability, let me begin by congratulating CAB and NIBM for convening an important conversation at the right time. I am sure the participation over the last two days has been strong, and the discussions have been both forward-looking and grounded in practical realities.

3. As I reviewed the papers presented, one message came through clearly. Digitalisation is not a goal by itself. It is a means. The real question is: how do we use digital tools to deliver financial services that are accessible, affordable, safe, and useful, while also supporting sustainability and resilience.

4. Against this backdrop, I would like to reflect on three shifts shaping this landscape, then underline what I would call the confidence architecture needed for digital finance at scale, and finally offer a few closing priorities for the road ahead.

From access to capability and confidence

5. The first shift is in how we look at inclusion.

6. For a long time, access meant inclusion but the next phase of that is about something deeper: capability and confidence. Inclusion becomes meaningful when households and small businesses can use financial products and payment rails regularly and safely.

7. Indeed, many discussions in the papers presented here highlight the idea that barriers to inclusion are not only physical. They can also be informational and behavioural. People may have connectivity but lack confidence. They may have access but not agency. They may have a digital tool but not the ability to resolve a problem.

8. This is why design matters. Effective inclusion solutions often look simple on the surface, but they are thoughtfully engineered underneath. They use plain language. They work in low bandwidth settings. They allow assisted journeys. They respect the realities of irregular incomes and modest savings.

9. A special dimension of capability is the gender gap in digital finance. Bridging this gap is not about devices and connectivity. It requires building women’s digital and financial skills and improving safety and privacy further in digital journeys. If we want digital inclusion to endure, products and processes must be designed around these realities.

From faster finance to fair finance

10. The second shift is about digital credit and digital intermediation.

11. Digital lending and platform-based models have expanded quickly because they offer speed and convenience. That is a real benefit. But credit is not like any other routine transaction. Credit can strengthen livelihoods. But, if poorly underwritten, it can also deepen distress through over indebtedness.

12. The discussions here highlighted a central point: the next phase of digital credit must be not only fast, but fair, transparent, and affordable.

13. A related theme is the growing role of data and algorithmic rule engines in credit decisions. Data can reduce frictions and widen access, but it also brings up some important questions. Are we pricing risk, or pricing vulnerability? Are decisions explainable in plain language? Are models being monitored for bias and drift?

14. These questions shape customer confidence, market discipline, and the credibility of the digital finance ecosystem.

From sustainability as a separate agenda to sustainability as core resilience

15. The third shift is the assimilation of sustainability into mainstream finance.

16. Sustainability is sometimes treated as a specialised product line or a reporting exercise. As climate and environmental risks do translate into financial risks, especially for climate-sensitive sectors and regions, sustainability has to be integral to our products and processes.

17. At the same time, digitalisation offers tools to strengthen resilience. Better data can improve risk understanding. More responsive credit can support adaptation investments. Digital monitoring can improve transparency and reduce the cost of compliance and reporting.

18. But we should also be realistic. Sustainability outcomes require more than digital tools. They require sound institutions, robust capital and good governance. Digital transformation can enable, but it cannot substitute for the fundamentals.

Confidence architecture is the next frontier

19. If you bring these three shifts together you will see that the next frontier is not simply building more digital finance. It is building digital finance that people can rely on. This calls for an ecosystem with strong foundations, with four key elements.

20. The first is security and resilience. As participation scales up, vulnerabilities also scale up. We must invest continuously in cyber security, fraud prevention, incident response, and business continuity. Confidence is built through reliability in ordinary times, and through competence and clarity when disruptions occur.

21. The second is accountability and effective redress. When a customer is harmed in a digital journey, they should not be passed from one entity to another. Responsibility must be clear. Grievance redress should be simple, time-bound, and effective. A system earns confidence when people experience that help is real, accessible, and fair.

22. The third is data discipline and meaningful consent. Digital finance runs on data. But data must be handled with discipline: purpose limitation, minimum necessary collection, secure storage, and transparent sharing. Consent must be meaningful, not hidden in fine print.

23. The fourth is inclusion with dignity. Inclusion is not only onboarding. It is ongoing service. It is also language, appropriate accessibility and respectful treatment. It is designing for the person who is least comfortable with technology, not only for the person who is most fluent.

24. Before I turn to the closing priorities, let me briefly underline the critical contribution of digital public infrastructure and interoperability. When core rails are resilient, widely usable, and interoperable, they reduce the cost of reaching the last mile and allow providers to compete on service quality rather than on customer lock-in. They also make it easier to deliver targeted support at scale, whether through faster benefit transfers, smoother onboarding, or quicker delivery of small-value financial services.

25. However, the wider the rails, the higher the responsibility. Strong governance is essential: clear standards, reliable uptime, auditable processes, and proportionate safeguards, so that innovation can scale without weakening system stability.

Closing: Five priorities going forward

26. As someone who has watched India’s digital finance ecosystem evolve at close quarters, permit me to close with five practical priorities that can help digitalisation deliver inclusion and sustainability.

27. First, build for outcomes, not optics. We should track adoption, but our focus should remain on what matters: active use, reliability, affordability, customer wellbeing, and resilience.

28. Second, design for the last user. If the journey works for the most constrained user, it will work for everyone. Simple interfaces, low-data design, assisted options, and clear grievance pathways should be treated as core features.

29. Third, make fairness non-negotiable. Innovation is welcome, but fairness is essential. Transparent pricing, explainable decisions, respectful collections, and strong redress mechanisms, all should be built into digital credit models.

30. Fourth, treat resilience as a design requirement. Operational resilience and cybersecurity are not mere compliance items. They are integral to service quality. People experience credibility through consistency and reliability, not through policy documents.

31. Fifth, collaborate, because no one actor can solve this alone. Digital finance and sustainability sit at the intersection of regulation, technology, business incentives, and human behaviour. Progress requires collaboration across regulators, financial institutions, fintechs, researchers, and civil society. Conferences like this help build shared understanding and improve the quality of solutions.

32. In conclusion, digitalisation increases reach and speed. It also increases the vulnerabilities. The task before us therefore, is to ensure that digital finance scales what is good: inclusion that is usable, innovation that is responsible, and finance that supports resilience and sustainability.

33. On behalf of the Reserve Bank of India, I thank CAB and NIBM for hosting this conference, and I thank all participants for contributing to a meaningful and constructive dialogue. I hope the ideas discussed here translate into safer rails, better products, and more sustainable outcomes for our citizens and our economy.

34. Thank you. Jai Hind.

Prof Nitin Upadhyay, Dean of Academics; Prof Jabir Ali, Dean of Faculty and Research; Prof Pranab Das and Dr. Ashish Kumar, Conference Chairs of this event;

Distinguished speakers, panelists and guests;

Faculty members, and above all, my dear students.

A very good morning to all of you.

2. Before I begin, let me say it is a pleasure and privilege to be at IIM Jammu, one of the youngest IIMs. In a short span, it has built momentum as a premier academic institution, and conferences like IFAC are part of that journey—bringing together faculty, students, and practitioners to engage with real questions in finance and accounting.

3. The theme this year is ambitious and important: financial strategies for inclusive and sustainable economic growth to achieve Viksit Bharat@2047. It is a theme that belongs not only in policy papers and boardrooms, but also in classrooms, because it is ultimately about how lives improve over time.

4. Since the audience today includes many young MBA students, I want to speak less like a regulator and more like someone speaking to future leaders.

5. Imagine it is your first job and your first salary hits your account. You have choices. You can spend it. You can save it. Or you can invest it. Now pause and ask yourself: before you do any of these three, what are the few things that you want from the financial system?

• Safety, so that your money is secure even when conditions become difficult.

• Fairness, so that products are not designed or sold in a way that exploits information gaps.

• Reliability, so that services work smoothly in daily life, and if something goes wrong, it gets resolved without running from pillar to post.

6. These three assurances are not only personal preferences. They are also a useful way to think about the kind of financial system India needs as we move towards 2047.

7. Apart from big numbers like GDP or GDP per capita, development is also about the quality of daily life: better jobs, stronger households, safer financial choices, and resilience when shocks occur. It is about whether growth feels real, broad-based and inclusive.

8. Finance will have to play a pivotal role in this transformation. It will have to mobilise savings, allocate capital, and manage risk. Done well, it will support enterprises and households across the country.

9. So, the first-salary question is not just a thought experiment. Over the next two decades, many decisions that will shape India’s financial system will be taken by people like you — in Banks and NBFCs, fintechs and payment firms, audit and consulting, corporate finance and treasury, start-ups, and in Government and public institutions.

10. India of 2047 will not be shaped only by technology or capital. It will be shaped by leadership of young students like you.

11. Leadership in finance is not just about intelligence. It is about judgement. It is about discipline. It is about what you choose to reward, what you choose to question, and what you choose to fix early.

12. When people think about finance, they often imagine numbers, models, and markets. These things matter. But finance is, at its core, a people business. Behind every deposit is a household trying to be secure. Behind every loan is an ambition to grow. Behind every insurance policy is a fear of uncertainty. Behind every fraud is a moment of vulnerability. Behind every failure of controls is a real loss borne by someone who did not fully understand the risk. If you remember that, you will become a better finance professional and a better leader.

13. Since this is a finance and accounting conference, let me add one more point. Finance needs numbers, but more importantly, it also needs integrity in numbers. In the age of dashboards and AI, it is easy to forget that accounting is a discipline of clarity. It forces us to recognise losses, admit uncertainty, value assets prudently, and explain performance in a way that others can rely on. In many organisations, the true difference between a good institution and a weak one is not how fast it grows, but how truthfully it measures itself.

14. I want to offer you a “career compass” in three parts. These are not technical rules. They are a few lessons that my own journey in banking has taught me, often the hard way. If you keep these in mind, I believe your decisions will be sound, and your leadership will be enduring.

Respect the customer

15. First part of the compass is to respect the customer. In the long run, customer outcomes are the strongest business strategy. They reduce disputes, lower reputational risk, and sustain participation in formal finance.

16. Many problems in finance start small, sometimes, quite literally, in the ‘small print’. A fee not explained clearly; A clause buried in the terms; A loan that is easy to take but hard to repay; or A product sold to meet a target, not to meet a need.

17. Over time, these small problems become big issues. They show up as complaints, disputes, defaults, and customer harm. Therefore, we should endeavour to design and sell products that are suitable, transparent, and fair. The best leaders prevent harm before it occurs. They do not wait for problems to become headlines.

Respect the financials

18. Second part is to respect the financials. The financial statements tells you what is sustainable and what is not. It tells you whether you are building strength, or simply postponing risk. Look beyond profits to the quality of assets, the stability of funding, the adequacy of buffers, and the concentration of exposures. Strength is built in good times and revealed in stress.

19. When times are good, you will always find reasons to relax discipline. Competition is intense. Targets are high. Growth looks easy. Risk appears distant. That is exactly when leadership matters the most. The best leaders use good times to build buffers, improve controls, and strengthen governance. They ask uncomfortable questions when everyone else is celebrating.

Respect governance

20. The third and last part of your career compass is to respect governance. Many failures in finance are not failures of knowledge. They are failures of governance. People knew what was going wrong, but they did not speak up. Or they spoke up, but no one listened. Or everyone noticed red flags, but incentives pushed them to look away.

21. As leaders you should endeavour to build systems where growth, risk, and conduct are aligned. Encourage effective challenge. Reward the right behaviours because ultimately what gets rewarded gets repeated. Foster an environment where teams can raise concerns without fear, where risks are discussed honestly, where numbers are not forced to look good.

22. Now let me translate this compass into a few practical habits you can use early in your career.

Ask better questions

23. Many people ask, “How fast are we growing?” A better question is, “What could break?”

• Ask, “What assumptions are we making, and what happens if they go wrong?”

• Ask, “What happens if the customer’s cash flows fall?”

• Ask, “What happens if the system is down for a day?”

• Ask, “What happens if a third-party service provider faces an outage?”

• Ask, “What happens if fraud spikes in a new channel?”

These questions are not the mark of a pessimistic ‘doubting Thomas’; they are the risk-sensitive questions, mark of a prudent leader.”.

24. One of the most valuable skills in finance is not giving answers. It is asking the right questions at the right time.

Communicate simply

25. A leader who cannot explain a product, a risk, or a decision in simple language often does not understand it deeply enough. Complexity is sometimes necessary, but confusion is not. Whether you work in credit, markets, compliance, audit, or fintech, your ability to explain clearly will be a major advantage.

Choose the long term over the easy short term

26. There will be moments where the easy path is tempting. A shortcut in due diligence; A small compromise on disclosure; A “temporary” relaxation of standards; or A target that encourages aggressive sales. These compromises may look small in the moment, but they compound. In finance, small compromises can become large losses.

27. Now let me connect this back to the national agenda of Viksit Bharat@2047.

28. India’s next phase of growth will require three things to happen together.

• We need a steady flow of capital into productive areas that create jobs and capabilities.

• We need inclusion that is meaningful, where people and small enterprises can use finance safely, not just access it.

• And we need customer outcomes to remain fair as finance becomes more digital and more data-driven.

29. This is where your generation will be tested, because your generation will work in an environment where everything scales quickly.

30. A product can reach ten million people within months. A credit model can approve loans in seconds. A payments platform can process massive volumes. This scale is powerful, but it also means that harm can scale quickly if design is poor, controls are weak, or incentives are misaligned.

31. Therefore, in finance, speed is not always a virtue. Sometimes speed hides weakness. Technology is a force multiplier. It amplifies good design as well as bad design. Eventually, the future will reward institutions that can combine efficiency and innovation with prudence, and growth with resilience.

Conclusion

32. Let me conclude by emphasising that the journey to Viksit Bharat@2047 is a collective endeavour. It will require sound institutions that can support growth through cycles; inclusion that improves real outcomes for households and enterprises; and customer protection that keeps pace with innovation.

33. If we align capital with capability, innovation with safeguards, and inclusion with well-being, the aspiration of 2047 will steadily become a lived reality for millions. It will call for leaders who can combine performance with principles, and ambition with discipline.

34. Before I close, my sincere thanks to the Director, faculty, staff and student team of IIM Jammu for the effort that has gone into organising IFAC 2026. Platforms like these help connect classroom learning with the realities of life, and they sharpen the judgement that future leaders will need.

35. With this I wish you a very engaging and insightful conference. Jai Hind.

It is my pleasure and honour to deliver the 14th Foundation Day Lecture of the Centre for Development Studies (CDS). Established in October 1970 by Professor K. N. Raj, CDS has been a premier academic institute in India for social science and development research. CDS's footprints in economic research have been evident through its pioneering work on human development, labour, industry, international trade, migration, decentralisation and local governance, among others.

The topic that I have chosen for my talk today is on some of the salient features of India’s economic growth in recent years and how they may be contextualised over the past four decades.

I focus on three defining features of India’s growth trajectory: first, its sustained momentum and gradual acceleration; second, the coexistence of rapid expansion with macroeconomic stability; and third, a demonstrated resilience reflected in increasingly stable and predictable economic outcomes. Where appropriate, these patterns are situated in a comparative cross-country perspective.

1. Economic growth has accelerated slowly but surely

Looking at the pace of economic growth in India since the 1980s, it is easily observable that the Indian economy has slowly but surely accelerated, at the pace of 0.03 percentage points a year on an average, during the past four and a half decades (Figure 1, Panel A). While growth rate averaged 5.7 per cent during 1980s, it improved to 5.8 per cent in the following decade; to 6.3 and 6.6 per cent during the decades of 2000s and 2010s, respectively; and further to 7.7 per cent during the last four years (Table 1).

Ten-year rolling averages of annual GDP growth rate confirm the trend acceleration, as well as the fact that there have not been any periods of prolonged stagnation or secular decline in growth (Figure 1, Panel B).

The acceleration in per capita income growth has been even faster than in GDP growth (Figure 2).² From a modest level of US$ 274 in 1981, and US$ 306 in 1991, India’s per capita income has increased nearly tenfold to about US$ 2700 in 2024. From 1981, it took about 23 years to double the per capita income whereas in the subsequent 22 years it has increased almost five-fold. As per October 2025 forecasts in the World Economic Outlook of the IMF, per capita income is projected to increase to US$ 2818 in 2025, US$ 3051 in 2026 and US$ 4346 in 2030.

Decline in population growth has been an important factor contributing to the acceleration in per capita income. India’s population growth has traditionally been significantly higher than that of the world. However, over the years it has declined at a faster rate than the global rate and, since about 2014, at par with the growth rate in world population (Figure 2, Panel B).

India has experienced a rapid decline in fertility rates since the 1980s. While the death rate has been declining too and has fallen below world average (See Annex 1, Figure A1, Panel A), the pace of decline in fertility rate has been faster than the decline in death rate, resulting in a slowing rate of population growth.³ These trends are indicative of the impact of increasing prosperity and education levels on demography. Going by international experience, these trends are likely to continue in the years to come, aiding a rapid increase in per capita incomes.

Since the early 1990s, the Indian economy has been growing much faster than the rest of the world. As a result, share of the Indian economy in the global economy has increased about 3 times, from about 1.1 per cent in 1991 to 3.5 per cent in 2024 (Figure 3, Panel A). The differential in growth rates has further widened in the last decade or so. Meanwhile, India’s per capita GDP, as a percentage of world per capita GDP, has also increased threefold, from about 7 per cent in 1991 to close to 20 per cent in 2024 (Figure 3, Panel B). These are in current US$ terms; in Purchasing Power Parity (PPP) terms, India’s per capita GDP relative to world per capita GPD is much larger.

We examine whether the observed growth acceleration is specific to India or reflects a broader pattern across other emerging markets. To assess this, we compare India’s linear growth trend with that of seven major emerging economies; Brazil, the Russian Federation, South Africa, Malaysia, Mexico, Türkiye, and Indonesia — collectively denoted as the EM7.⁴ Results presented in Annex 2 indicate that this group of countries, at the aggregate level, did not witness an acceleration in growth. However, the trend in India’s 10-year rolling average growth rate is significantly positive. The positive coefficient on Trend × India suggests a steeper growth trajectory for India relative to the EM7 economies as well.

2. Indian economy has experienced a virtuous cycle of accelerated growth and macroeconomic stability

An economy is typically assessed to be macroeconomically stable if specific outcomes (commonly, inflation, current account deficit, fiscal deficit, quality of public debt and deficit, and those pertaining to the financial sector) are seen to be sustainable, growth supportive, and not indicative of excessive underlying risks or overheating.⁵ For India, most of these indicators have remained in a healthy range over the last four decades with notable improvement in recent years.

Inflation has both moderated over time and has become more stable, especially under the flexible inflation targeting (FIT) regime. Average annual CPI inflation in India has declined from close to 10 per cent in the 1990s to about 6 per cent a year in the subsequent two decades; to below 5 per cent in the last four years; and is likely to remain benign in the coming months (Figure 4, Panel A). Inflation has also declined relative to other countries. India’s inflation differential has narrowed vis-à-vis advanced economies (AEs) and other emerging market and developing economies (EMDEs) (Figure 4, Panel B).

India’s decadal average current account deficit (CAD) has varied within a moderate range of 0.5-2.2 per cent of GDP since 1990, and has remained modest in recent years (Figure 5, Panel A). Compared to an average CAD of 1.4 per cent between 1980-81 and 2019-20, it has halved to an average of about 0.75 per cent of GDP in the last six years. For most part, India’s current account deficit is quite comparable to many of its emerging market peers (Figure 5, Panel B).

The resilience of India’s current account deficit can be attributed to its diversified sources of inflows, which have only strengthened over time. Services exports and remittances in particular have significantly contributed to the robust inflows. It is expected that the recently announced India-USA trade deal, India-EU free trade agreement (FTA) and the newly signed or prospective new trade agreements will further strengthen the current account.

The move to a formal process to institutionalize fiscal discipline starting with the Fiscal Responsibility and Budget Management (FRBM) Act, 2003 has had a positive impact on macroeconomic management and has helped build resilience.

Even though India’s public debt has traditionally been higher than many other countries, Eichengreen, Gupta and Ahmed (2024) note that it is sustainable as per the standard metrics. The fact that a large part of this debt is held domestically, by institutional investors, in long tenors, and is primarily denominated in local currency limits its roll over risk. They further note that under reasonable assumptions, the debt-to-GDP ratio is likely to decline gently (or remain stable).

This is reflected broadly by a persistently favourable real growth rate - real interest rate differential (Figure 6).

The commitment to fiscal consolidation opened the fiscal space during the COVID-19 pandemic to embark on growth supporting and social security measures. Similar to most other countries, India too expanded its public expenditure, leading to rise in fiscal deficit and debt during COVID (Figure 7). But by 2022, as the economy progressively recovered and strengthened, fiscal policy also shifted gears to a path of consolidation, with a focus on low fiscal deficits and medium-term debt to GDP consolidation targets.

This is in contrast to the patterns seen in advanced and emerging market economies where fiscal deficits and debt levels have, in general, registered an increase since 2022, after a brief decline from their elevated levels during COVID (Tables 2).

Two additional noteworthy features of the Government finances stand out in the recent period. First, the fiscal consolidation was accompanied by an improvement in the quality of expenditure, with the share of capital expenditure in overall expenditure seeing a dramatic increase in recent years (Figure 8).

Second, though revenue receipts of India remain somewhat lower than in many other countries, there are signs of an improvement in direct tax revenue collections of late, with a focus on widening tax base while also progressively rationalising the tax structure (Figure 9). Together, these developments - accelerated growth, moderation in inflation and its lower volatility, moderate and stable current account deficit, consolidation of public finances - underscore the broad-based nature of India’s macroeconomic stabilisation.

There has been a dramatic improvement in the health of the banking sector, compared to a decade ago (Figure 10, Panel A). After close to a decade of balance sheet repair and successfully withering the shock of the COVID-19 pandemic, Indian banks at present are in a structurally stronger position than in the past. They are also in a better shape relative to their peers in many other countries (Figure 10, Panel B). The improvement is visible across all the key financial ratios.

Capital positions remain robust. The Capital to Risk-Weighted Assets Ratio of scheduled commercial banks stood at 17.2 per cent in September 2025, comfortably above the regulatory minimum. Asset quality has also improved markedly and remains at multi-year highs. The gross non-performing asset (GNPA) ratio declined to 2.1 per cent in September 2025 from 2.5 per cent a year earlier and is much below the 5 per cent seen in the previous two decades.

Liquidity conditions within the banking system are also comfortable. The Liquidity Coverage Ratio stood at 131.7 per cent as of end-September 2025, much higher than the regulatory threshold. Profitability indicators further underscore the sector’s improved health. As of September 2025, the annualised return on assets (RoA) was 1.3 per cent and return on equity (RoE) 13.1 per cent. Net interest margins (NIM) remained healthy at 3.3 per cent.

Taken together, at the current juncture, a robust and resilient banking sector and the rapid expansion of the non-banking space are providing the favourable pre-conditions for the domestic financial system to adequately support the ‘Viksit Bharat’ 2047 objectives.

3. Economic outcomes have become less fickle and more predictable

Indian economy is not just growing at an accelerated pace, it is also depicting enhanced macroeconomic stability which is reflected in a whole host of economic outcomes becoming steadier. The economic outcomes now materialize within a narrower range, most notable of which are aggregate economic growth - overall as well as growth across sectors - and inflation (Figure 11).

Agriculture, in particular, has seen its growth improving since 2010, and a marked reduction in growth volatility. Manufacturing growth has remained broadly range-bound, though its volatility too has come down. Services, the main driver of growth from supply side, have experienced distinctly lower volatility over time. Inflation has shown visible and sustained signs of moderation and much reduced volatility. In almost all these variables, the range of outcomes has also shrunk over the decades.

What could this reduced volatility be attributed to? One possible factor is that the economy has become more resilient to some of the known shocks, both domestic and external, such as deviation in rainfall from long period average, ‘other natural events’, ‘oil price shocks’, ‘decline in external demand’, or ‘global policy uncertainty’. Besides, the strength of its large and well diversified economy is more apparent; and policy decisions becoming ever more timely and nimble.

Agriculture sector is less impacted by the routine deficiency or erratic patterns in rainfall. The negative correlation between agriculture growth and absolute deviation of rainfall from its long period average (LPA) has weakened considerably during 2011-24 as compared with 1980-2010 (Figure 12). This may be attributed to crop diversification, expanded irrigation networks, and availability of more advanced and accurate weather information which allows for timely policy responses to such shocks. This is not to say that we have overcome all the challenges emanating from climate change or weather-related events, but simply that when confronted with the same shocks as witnessed before, agricultural growth, productivity, and resilience thereof are now higher than before.

Second, the Indian economy has achieved more insulation from sharp increases in global oil prices. The oil intensity of GDP (consumption of oil per unit of GDP) has been declining consistently (for India as well as for most other countries) (Figure 13). Going forward, this trend is expected to persist as Indian economy transitions towards more focus on renewable energy and improved overall energy efficiency, and composition of output shifts further towards less energy-intensive sectors such as services.

This insulation is partly the reason why it has been possible to maintain a low current account deficit, and why this deficit has been seemingly disconnected from global oil prices. Interestingly, with reduced importance of oil as a source of energy worldwide, sharp spikes in oil prices have become less frequent in recent years. Adding to this, the changed demand supply balance in the oil market has led to a declining trend in global oil prices since the spike of 2022 (Figure 13, Panel C). The decline is sharper in real terms (constant US$).

India’s policy frameworks have steadily evolved and today reflect global best practices, while being carefully adapted to domestic realities. In fiscal policy, the Fiscal Responsibility and Budget Management (FRBM) framework has provided a rule-based path for consolidation, even as flexibility was exercised during extraordinary shocks like the pandemic. In tax policy, reforms such as the Goods and Services Tax (GST) have unified the indirect tax system and improved compliance. In monetary policy, the Flexible Inflation Targeting framework introduced in 2016 has helped bring down both the level and volatility of inflation and strengthened policy credibility (Gupta 2025). In the broader financial sector, strengthened banking supervision, improved capital norms, and regulatory reforms across markets have enhanced resilience.

Finally, despite implementing prudent policy frameworks, emerging market economies remain susceptible to reversals of external capital flows for reasons beyond their control or due to global policy uncertainty, the kind we have been witnessing since the past year. Leveraging past experiences, and using the cushions built during quiet times, the government and the RBI now respond promptly to these shocks. This has further insulated the real economy from the disruptive impact of such reversals.

4. Conclusion

High, stable and accelerating growth, and more predictable economic outcomes have become the hallmarks of the Indian economy. The Indian economy, with its macroeconomic stability, policy consistency, a large and diversified demand base consisting of domestic consumption as well as exports, and a diversified production base is assured of a continuously improving economic trajectory. This is in contrast to a more modest economic promise of most other Emerging and Developing Economies, for they lack one or more of these enabling factors.

Reference

Barry Eichengreen, Poonam Gupta & Ayesha Ahmed, (2024). "India's Debt Dilemma," India Policy Forum, National Council of Applied Economic Research, vol. 20(1), pages 1-62.

Fischer, S. (1992). Macroeconomic Stability and Growth. Cuadernos de Economía 29 (87): 171-186.

Gupta, Poonam (2025). “Policy Frameworks for Economic Resilience: The case of Emerging Markets and India” (Address at the Business Standard BFSI Insight Summit, Mumbai).

Gupta, Poonam, Ahmad, Junaid Kamal, Blum, Florian Michael & Jain, Dhruv, (2018). "India's Growth Story," India Policy Forum, Vol 15(1).

IMF (International Monetary Fund), World Economic Outlook, October 2025.

RBI (Reserve Bank of India), Database on Indian Economy.

RBI (Reserve Bank of India), Financial Stability Report (FSR), December 2025.

World Bank, World Bank Group Database.

Annex 1:

India has achieved a faster decline in fertility rate as well as a faster decline in death rate compared to the world average (Figure A1).

These trends in demography are likely to continue in the years to come. Besides, while population growth is expected to continue to fall the working age population in total population is likely to increase for several more decades (Figure A2).

Annex 2: Trend growth rate in India compared to other Large Emerging Markets

We compare the linear trend in GDP growth rate in India with seven of the largest emerging economies: Brazil, the Russian Federation, South Africa, Malaysia, Mexico, Türkiye, and Indonesia (we refer to these as EM7), during 1980-2024. For this, we estimate regression of the following form:

We find that the coefficient of a linear trend for growth rate for EM7 is negative but insignificant, indicating there is no evidence of growth acceleration in these countries. The coefficient of interest, β2, is positive 0.069 (Table A1, Column 2) and significant, indicating that India has been able to achieve growth acceleration contrary to the experience of other emerging market economies.

¹ Inputs received from GV Nadhanael, Asish Thomas George, Anand Shankar, Somnath Sharma, and Anirban Sanyal are gratefully acknowledged.

² The higher rate of acceleration in per capita income than in GDP is reflected in a higher trend co-efficient relative to GDP.

³ While population growth is expected to continue to fall, the working age population in total population will continue to increase (Annex 1 Figure A2).

⁴ Though the comparator set of large emerging countries have had higher per capita income.

⁵ Fischer (1992) similarly proposed a stable macroeconomic framework as the one in which inflation is low and predictable, real interest rates are appropriate, fiscal policy is stable and sustainable, the real exchange rate is competitive and predictable, and the balance of payment situation is viable.

Good evening.

2. The Chairman and members of the Board of Axis Bank; the MD and CEO and the senior leadership team of the Axis Bank family, the Champions being recognised today, and colleagues, ladies and gentlemen.

3. Thank you for the warm invitation. It is a pleasure to be here at Axis House this evening, and to be part of an occasion that is clearly special for the institution and its people.

4. Banks routinely honour top performers. But today’s occasion is different. It honours the people who shape the character of an institution through their actions.

5. Being recognised as a Champion today’s is not just about what you achieved, but how you achieved it. It sends a clear signal across the organisation, that ends count; but means matter.

Why organisational culture matters

6. In my experience, what helps institutions meet rising expectations—year after year—is not only strategy; it is culture. That brings me to the theme of five values behind today’s awards—customer centricity, ethics, teamwork, transparency, and ownership—these are not abstract concepts. They are practical guides for daily behaviour. I want to share a few thoughts, briefly on each of these five values.

Customer centricity is mainly about doing the basics right

7. Policies are made at the highest levels. But, in a branch, you learn quickly that policies do not meet customers-people do.

8. Customer centricity is often spoken about in big terms, but it is usually the basics that matter most. Clarity in communication. Accuracy in execution. Fairness in dealing. Predictability in service. A respectful tone and timely resolution.

9. The best customer service is often quiet and consistent. Not the occasional grand gesture, but a habit of being clear, careful, and responsive.

Ethics as a working discipline

10. Ethics in banking is sometimes treated as a soft theme. It is not. It is the discipline that protects customers, employees, and the institution itself.

11. Every large organisation faces moments of temptation: the temptation to cut corners, to postpone a difficult disclosure, to take a convenient interpretation, or to treat a complaint as an inconvenience.

12. Ethics is what stops small compromises from becoming large problems. It is not about being perfect. It is about how you handle grey areas, and how fairly and quickly you correct a mistake.

13. The same mindset supports regulatory discipline as well. Regulatory discipline should never be seen as a box-ticking exercise. It is part of institutional reliability and long-term credibility.

The importance of Teamwork

14. Modern banking risks do not sit neatly within one department, they cut across departmental boundaries.

15. Institutions respond best when information moves across early and teams coordinate without ego. Teamwork is therefore a control mechanism. It reduces blind spots and improves response time.

Transparency

16. Transparency means customers are given clear information and are not surprised later. It means decisions are recorded in a way that can be explained.

17. In today’s world, digital journeys should be designed so customers are clear about what they are doing, what they are authorising, and what they are not. Terms, charges, and consent should be unambiguous. Alerts should be timely and meaningful. And when something does go wrong, customers should know quickly what steps to take, and the response should be predictable and supportive.

18. Transparency is also closely linked to internal culture. When you say, “Dil Se Open”, it means you are internally open as well. In the healthiest of organisations, people are comfortable raising concerns, flagging errors—because the organisation values such early warning signals. Transparency is not only about outward communication; it is also about inward honesty.

Ownership is what makes values real

19. Ownership is the difference between “this is my task” and “this is my responsibility.” Ownership shows in the willingness to take a difficult call, correct an error, raise a concern, help a colleague or customer, and follow through until closure.

20. This is precisely why Champions matter. Champions do not only deliver results; they set standards that others copy. People observe what the organisation celebrates. When an institution celebrates ownership, ethics, and transparency, it sends a clear message about what success means here.

Closing message

21. To the awardees: congratulations once again. You have earned this recognition. But recognition also brings responsibility. Keep your standards high at all times.

22. To everyone across the Axis family: while today Bank recognises 100 Champions, the strength of this institution rests on the collective conduct of thousands more. Not everyone will receive an award on stage, but every role contributes to the organisation’s resilience and reputation.

23. Let me close with a simple thought. Institutions endure not because they avoid all mistakes, but because they respond to challenges with integrity, humility, and responsibility. In the long run, it is values, not just strategies, that determine credibility and longevity.

24. Once again, congratulations to all the Champions. I wish the Axis Bank family continued success, may you all be rooted at all times in good governance, strong ethics, and an unwavering commitment to high standards.

25. Once again, thank you for this opportunity. I wish you a pleasant evening ahead. Jai Hind.

Participants from the Reserve Bank of India:
Shri Sanjay Malhotra - Governor, Reserve Bank of India
Shri T. Rabi Sankar - Deputy Governor, Reserve Bank of India
Shri Swaminathan J - Deputy Governor, Reserve Bank of India
Dr. Poonam Gupta - Deputy Governor, Reserve Bank of India
Shri Shirish Chandra Murmu - Deputy Governor, Reserve Bank of India
Dr. Ajit Ratnakar Joshi - Executive Director, Reserve Bank of India
Shri Sanjay Kumar Hansda - Executive Director, Reserve Bank of India
Shri Indranil Bhattacharyya - Executive Director, Reserve Bank of India

Moderator:
Shri Brij Raj - Chief General Manager, Reserve Bank of India

Brij Raj:
Good afternoon, everyone. Welcome to this Post-Policy Press Conference, Sixth for the Financial Year 2025-26. We have with us, Governor, Reserve Bank of India - Shri Sanjay Malhotra along with Deputy Governors - Shri T. Rabi Sankar, Shri Swaminathan J, Dr. Poonam Gupta and Shri Shirish Chandra Murmu. We also have with us today, Executive Directors, Dr. Ajit Ratnakar Joshi, Shri Sanjay Kumar Hansda and Shri Indranil Bhattacharyya. I also welcome my other colleagues from the Reserve Bank.

Before we begin, we have a few housekeeping announcements. Sir, there are 24 participants from the media. I request the media participants to please stick to one question so that everyone gets a chance. I also request everyone to switch on the mic while speaking, so that those watching the live telecast are able to hear clearly. And once you have finished speaking, please switch off the mic. Sir, with your permission, I will now call out the names.

Sanjay Malhotra:
Yes.

Brij Raj:
Thank you, Sir. I will request Ms. Latha Venkatesh from CNBC TV18 to please ask the first question.

Latha Venkatesh, CNBC TV18:
Thank you, Mr. Brij. And thank you, Governor, for the opportunity. Well, the worry is not so much with inflation and GDP with the numbers in transition. The worry is with the way in which near-term call rate and repo rate have fallen. The call rate and Tri-party Repo Dealing System (TREPS) rate have fallen way below the repo rate. I mean, they are almost a percentage point between 4.25 and 4.75 actually. So, what is the thinking behind allowing that kind of a fall?

Before, on the 1st of February, the question we would have wanted to ask you is how will you manage this large borrowing programme? The market was rightly worried, and yields shot up. So, that question as well. The immediate short-term fall in call rate and TREPS rate, is it intentional? What is your view of how it may evolve? And separately, this medium term, how are you going to help it? Will it be OMO in liquids? What is the expectation?

Sanjay Malhotra:
So, let me say, as mentioned in the Monetary Policy Statement, liquidity is something that is our duty to provide - ample liquidity, sufficient liquidity, as is required to meet the productive needs of the economy. That is the first task. And the second task, to be able to ensure that monetary policy transmission happens - not only in the overnight market but in all other markets - the money market, in the Government security market, the corporate and the credit market. So, whatever we do with regard to liquidity is keeping this overarching goal in mind.

Now the tools that we have for liquidity, you are aware. We have a number of tools for them, especially OMOs, long term, short term, VRRs, VRRRs, so as to be able to ensure that we give liquidity, and we keep the overnight liquidity at the policy repo rate. That is the immediate target to keep it over there. And then hope that this will transmit into all other markets.

The transmission, you are aware, has been quite good, especially till December in all markets. After December, there was slight hardening, as I have mentioned. There was some hardening in the money markets. But overall, transmission has been excellent. We will continue, as I mentioned in my statement, that we will continue to provide liquidity proactively and pre-emptively. The exact details are not something that we always or by rule mention in the policy statement or only in the policy statement. Liquidity is a continuous operation that is done.

So, you have seen that we have provided liquidity even outside the policy statement, as we did later when we felt that there was a requirement for liquidity in the second half of January, we followed it up with whatever we had announced in the Monetary Policy Statement, we followed it up with liquidity.

So, all I can say is that we will continue to provide sufficient liquidity with an aim that the Monetary Policy transmission happens in all markets.

Latha Venkatesh, CNBC TV18:
Sorry to intrude. But there is no mention of the word switches or buybacks by you or by the Government. So, the market is worried in the medium term. Right now, it is a little stupid to ask about long term. The liquidity is so plentiful now. But in the medium term, do these things still...

Sanjay Malhotra:
Are you referring to the Government? See, the Government programme, I think, again, we have been looking at the gross numbers, which I don't think really is the correct way to look at it, frankly. The way to look at it, so we have been looking at ₹17 plus lakh crore or something. But there are much more redemptions this year, coming year, next year, than they were last year. So, as a result of that, the gross calendar will obviously be higher.

But if you look at the net numbers, ₹11.53 lakh crore is the number for this year Government securities borrowing programme. Next year, it is budgeted to be ₹11.73 lakh crore. It is only ₹20,000 crore more, which is, I mean, one would have expected at least if the budget size is going up by almost 9% or so, 8-9%. GDP is expected to grow at 10%. One would expect a 10% growth. The growth is much less. We should be really looking at net.

Number two, also, you find that this year or in the year to come, money will be raised also through the treasury bills, which will help in further, I think it will help in managing the yield curve better. And we also find that the budgeted numbers for small savings are also quite conservative.

So, I think, the kind of numbers, the borrowing programme that the Government is looking is much on the lower side. And they should be able to raise these kind of resources at very reasonable prices.

I will request Shri T. Rabi Sankar to further add onto the switches, some ₹2.5 lakh crore of switches have also been planned. That will also further help on the liquidity and the management of the yield curves.

T. Rabi Sankar:
That right. And buybacks are not factored in at this point in time. They are factored in during the course of the year. To the extent there will be buybacks, the gross borrowing number, to that extent, will come down.

Governor explained all the factors clearly. I just wanted to draw the attention to the sense that the gross borrowing is large. We should put them in context. Look at 2007-8. We were borrowing ₹1.9 lakh crore per year. Two years later, 2.9-10, we were borrowing 5.8, 3x the gross borrowing. Was that managed? That was managed.

You look at relatively. Look at 2020, 2021. We were borrowing about 7 lakhs. In two years' time, we were borrowing 15 lakhs, right? So, these numbers go up. If you compare to that, the increase is nothing significant at all. I am certain Reserve Bank will be able to manage the Government borrowing program quite efficiently. Thank you.

Brij Raj:
Thank you, Sirs. We will take some more questions from our left side before we come to the right. Next, I will ask Manojit Saha from Business Standard to ask his question. Manojit, please.

Manojit Saha, Business Standard:
The TREPS rates have collapsed, which has created some pain for the non-banks. But at the same time parking in Standing Deposit Facility (SDF) has gone up very significantly over ₹3 lakhs. Is there a plan to tackle lazy banking? Is there a discussion on whether you can cap how much banks can borrow from SDF or widening the corridor, bringing SDF down so that banks are forced to lend to productive resources? And consequently, do you think the CD ratio of more than 80%, 81% is a new normal now, given the constraints of deposits that we have seen?

Sanjay Malhotra:
See, we did review the liquidity management framework. Your question is actually linked to the liquidity management framework that was done recently, and not many changes were announced.

Let us keep in mind that this is a complex subject, because these three markets - TREPS, call money markets, and the repo market, there is very high linkage. We mentioned that when we decided not to change it. In the medium to long term, there is a very high correlation. And so that is why we continue to target the call money rate, which is called the weighted average call rate (WACR). Over short periods of time, on day-to-day basis, there can be fluctuations. There can be non-alignments. But on the whole, I think, as of now, we are not looking at making any changes, immediately.

However, as you have also pointed out, there can be different ways of looking at it, which, at the moment, as I mentioned, we are not looking at whether to change the corridor and how to better manage it. As I mentioned, this is complex. We are right now not looking at making any further changes.

To your second question on CD rate, see, this is cyclical. At a period when your credit is more than deposits, it is quite expected that the CD rates will go up. And at times when credit is not growing so much, then the CD ratios will come down. And we have seen this happen over and over again. There is a time when the CD ratios go up, and then there is time when the CD ratios come down, depending on where we are in the business cycle of the banks.

But I may mention that, for us, it is not the CD ratio which is important. What is important is liquidity. There is a liquidity coverage ratio (LCR) framework for it. There is a Net Stable Funding Ratio (NSFR), which is there for medium-term liquidity. There is an LCR for the immediate or the one-month liquidity that we are looking at. Both of them - for the banks, as well as for the non-bank financial companies, are at very comfortable levels. So, there is no issue over there.

Manojit Saha, Business Standard:
If I can just ask one clarification. There was no mention of INR or BoP deficit in the policy. Is it because you are pretty much comfortable with the trade deals and the inflows and all? Is that the reason?

Sanjay Malhotra:
See, our macroeconomic fundamentals of the country, including the external sector, are very strong, very robust and very healthy. Whether you look at growth, inflation, whether you look at the current account on the external side, or you look at even the capital account side, I think, near-term, medium-term outlook is very healthy, is very favourable.

You are aware that the Government has taken a series of measures to increase our external position. Number of bilateral as well as multilateral deals have been signed. EU, EFTA earlier, Oman earlier, UK. And now the prospective US deal. All of these will help on the top of a very, very comfortable current account that was last year - 0.6% of our GDP. First half of this year - only 0.8% of the GDP. On top of this, with all these deals, agreements, it should only further help, not only on the current account - the trade side, merchandise and services, but also on the investment side, because a lot of them have investment commitments. Like, for example, EFTA, I think, had $100 billion, New Zealand had $20 billion.

On top of that, even on the investment side, the Government has been very proactive. It has taken a number of measures. First of all, let us keep in mind, these are not in our domain. These are in the domain of the Government. The regulators are there primarily to facilitate whatever economic activity is going to happen, whether it is domestically or whether it is in the external sector. But I want to remind everyone that the Government has been very proactive, both on current account as well as capital account. Latest example on capital account being opening up of the insurance sector to 100% FDI, that will help. Lastly, this year, we have witnessed record deals in the banking space and the NBFC space, about $15 billion of announcements or FDI already that has come in. And then a number of other measures that now the Government is taking, I was very happy to see in the budget - the tax holiday, for example, for data centers. That should bring in a lot of investments in our country.

Safe harbour rules were in the works for some time. The safe harbour rules now in place for IT. I would like to draw attention to all of you and to your viewers. I think this has not perhaps gained the attention that it deserves. It is a very big move towards tax certainty, simplicity, ease of doing business within our country.

All these global capability centers (GCCs) that you see are being set up, they will vastly gain from, and these are only some of the measures that I have mentioned to you. In the near term, in the medium term, as mentioned, even in the Monetary Policy Statement, we are very confident of meeting our external sector responsibilities, whether it is on the current account, you are aware we mentioned 11 months of imports. Now, that is imports. If you look at deficit (my DG tells me one should be looking at the deficits) - if it is $10 billion, $20 billion, let us say - then we have sufficient reserves for many decades, not just 11 months of import, but many decades of deficit. Similarly, our short-term borrowings, debt, twice the reserves of our short-term borrowings, twice. So, on the external side, we are very comfortable, and I did make a mention of that in my Monetary Policy Statement. Thank you.

Brij Raj:
Thank you, Sir. I will request Ankur Mishra of ET Now to ask his question. Ankur, please.

Ankur Mishra, ET Now:
Thank you, Brij ji. And good afternoon, Governor. I want your attention towards the inflation-growth dynamics. On one hand, when you are talking about growth - of course, you have revised your guidance upwards, and you mentioned about the deals as well, which augurs well - but on the inflation front, you are inching over 4% in the next two quarters, but you have also given a caveat that precious metals is accounted for that. So, in that scenario, last time when you mentioned the same thing you used about Goldilocks, the sweet spot scenario. Are we still in the sweet spot or you think the situation is slightly different?

Sanjay Malhotra:
We are certainly in the same sweet spot, may be even better because growth is looking up. Growth is looking even better, and inflation is the same. If one is looking at headline, 0.1%, 0.2%, 20 basis points here and there - is a very small number, point number 1; point number 2, it is headline. As mentioned in my statement it is primarily to do with base effects, it is primarily to do with the volatility in the food prices. Core inflation, underlying inflation, barring precious metals, is very benign, continues to be benign. So, we are in the same position, more or less same position in so far as inflation is concerned. Growth seems to be better than earlier, so we are in a better position than we were when we met last. Over that a number of developments have happened, we are all aware as to the reasons as to why we are in a better position now today than we were earlier.

Brij Raj:
Thank you, Sir. I will now request Anup Roy of Bloomberg to ask his question. Anup, please.

Anup Roy, Bloomberg:
Sir, Reserve Bank of India is selling US treasury for some time now. In 2 years, the treasury holding...

Sanjay Malhotra:
Who told you this?

Anup Roy:
The data shows that it is down 26%...

Sanjay Malhotra:
I do not know where you have got this data from.

Anup Roy:
US Treasury data...

Sanjay Malhotra:
No, no, certainly not. There is no such...

Anup Roy:
So, the treasury holding data there shows that it is now $174 billion which is...

Sanjay Malhotra:
See, you are aware that our forex reserves had come down. So, as a result of that overall, when they come down, then all holdings would come down. So, they will change, so those are fluctuations on a day-to-day or a week-to-week basis that we give out, but there is no reduction in our holdings of the US treasuries.

Anup Roy, Bloomberg:
Sir, can I ask another question on the rupee, that, sir, when the rupee was depreciating...

Sanjay Malhotra:
Let us keep in mind that there are so many other people, we are taking their time. So, if your question is not asked by others, then we will come back to you.

Anup Roy:
Yes.

Sanjay Malhotra:
Okay.

Brij Raj:
Thank you, Sir. Next, I will request Hamsini Karthik from Moneycontrol to ask a question. Hamsini, please.

Hamsini Karthik, Moneycontrol:
Thank you. Good afternoon, Governor, and everyone. My question is with respect to transmission of repo rates. It seems to be that bank lending transmission has happened much more effectively versus on deposits. I agree on deposits we have had transmission, but much of the transmission is at the lower end of deposits. The middle segment which actually matters to the retail depositors is continuing to remain high, and as an allied we also saw CD of India's largest bank being raised at 6%. It does put a lot of cost pressure at a time when repo is being on a pause at this point in time or has reduced over the last 1 year. What are your thoughts around this?

And I have a second question slightly unrelated, but what got my attention in your speech is your reference to precious metals this time around. We have also seen that gold loans as a segment has gone up by 86%. Much of it is coming due to the price volatility and not really the tonnage adding up to the growth in the segment. At RBI, are you a little concerned or would you want to look at how this does not have societal ramifications, should there be higher auctions as gold price is correct?

Sanjay Malhotra:
So, let me correct you that precious metals did find a mention if I remember correctly even in the last policy, not only this policy statement. But on the gold loans, we are very comfortable. We have been reviewing all the portfolios, whether it is gold loans, whether it is MSMEs, whether it is personal loans - all categories they show good asset quality, low slippages and no cause for any concern. The loan-to-value (LTV) ratios for the gold loans are quite low, although we have a higher limit, going up to even 85%, 70% to 85% depending on the amount of loan, but the LTV ratios being maintained by the banks as well as the NBFCs are on the lower side. As to policy transmission, your first question on deposit size, it is expected and that has been the case always that on the deposits, the policy transmission happens slower because on the advances side, credit side, we have rates which are linked directly to external benchmarks like the repo and T-bills. So, over there it is faster and in the deposit rates it is slower. So, that is to be expected. It has improved, it is improving. From every policy statement, we look at it even more closely. We gave out the numbers to you - policy to policy statement wise, but they have been improving and we are hopeful that they will further continue to improve.

Hamsini Karthik, Moneycontrol:
Precious metals will ease over a time. Is that your estimation, Sir, in that case?

Sanjay Malhotra:
Over a period of time, certainly they will decrease.

Brij Raj:
Thank you, Sir. We will now take a few questions from the right side. I will request Sangita Mehta from The Economic Times to ask her question.

Sangita Mehta, Economic Times:
Thank you. Governor, could you elaborate on the policy, you have spoken about empowering customers, you have spoken about a lot of things on mis-selling and the compensation for unauthorized transactions. On those things, could you elaborate? On this compensation, I also wanted to know whether if a person gives OTP, will he still be compensated?

Sanjay Malhotra:
I am so happy that you asked these questions. People have been busy asking questions on markets, but obviously there are many people in this room who ask questions directly related to customers. Every policy and even outside, it has been our conscious effort that we continue to improve customer centricity, the customer experience, the customer delight that all of you, including us, as customers expect from banks, NBFCs and the regulated entities. Mis-selling, yes, this has been a concern. We have been mentioning it, there have been directions with regard to mis-selling and this time we have codified them. We will be issuing the draft guidelines with regard to mis-selling.

Similarly, there is a framework which we will now be taking out for compensation for small frauds because we have observed that while in value, they constitute a very small proportion, but in terms of numbers, I think 65% of them have less than ₹50,000 or so in terms of amount. So, as long as they are defrauded, whether on their own accord or anyone's accord, no questions asked, ₹25,000 or 85%, you will have the details very shortly which will be there. It is a draft, and we will compensate them as long as it is unintended, and they have lost that money. Would you like to, Shirish, would you like to bring in more details?

Shirish Chandra Murmu:
Like the Governor said, the guidelines will come out soon. Basically, both in terms of your question about mis-selling, emphasis is on product suitability, customer appropriateness and also consent. These are the pillars on which we will be giving the detailed guidelines. And as far as compensation, which is first time we are proposing the guidelines, ₹25,000 is the limit. Of course, there will be some rules, and it will be one time. So, details will be out very soon.

Sangita Mehta, ET:
Sir, will the customer be compensated if OTP is given? That is very simple. Okay, thank you.

Sanjay Malhotra:
If he loses the money, no questions asked as long as he has lost the money, making checks that it is not kind of malafide. So, there are checks in the system to ensure that. That is why we have kept the amount very small. There is skin in the game for the customer, 15%. There is skin in the game for the banks, 15%. And the remaining amount we propose that we will provide from the Reserve Bank. And the amount is very small. We will see how it goes. But for the small customers for whom this actually means a lot, this is a way of providing some immediate relief, some immediate solace.

Brij Raj:
Thank you, Sirs. I will now request Alexander Mathew of NDTV Profit to ask his question. Alexander, please.

Alexander Mathew, NDTV Profit:
Good afternoon, Governor. Good afternoon, everybody else. You have covered quite a bit of ground. Let me ask you about what you said on credit growth. And you spoke about system-wide closer to 14%, and you said several pockets are seeing growth. My question to you is allied with what some of my peers have already asked. One would assume that the trajectory would increase heading into the new year as the impetus to growth increases. But is there going to be a curtailing of the extent to which it can grow by the fact that the CD ratios remain high? Have you factored that in? And there is an argument that has also been made that a large part of this spurt in credit growth we have seen in the recent past is gold-loan linked. Is that something that you have witnessed? And also, if you can comment on why you considered the measure that you did on Real Estate Investment Trusts (REITs) and MSMEs at this point, and may be give us a little more detail on that.

Sanjay Malhotra:
So, the first question I will leave to DG, because whatever I had to say on credit growth I already mentioned. I will ask DG Swaminathan to maybe add a little bit more flavor to the credit growth and to the gold loans, of course, which have witnessed huge growth rates to the extent of about 200% or so. Your second question, let me touch base on that, which is on MSMEs.

So, MSMEs are the growth engines. They are a very important component of our economy, especially from the point of view of generating employment. And so this limit of ₹10 lakh has been there for quite some time, I think 2010 or so, since 2010 is this limit. So, it's basically indexing for inflation. That's what it is from ₹10 lakh to ₹20 lakh. The second one is on REITs. Again, we had already allowed lending to Infrastructure Investment Trusts (InvITs). And so now we are in the same vein, allowing lending even for REITs. This will further help the real estate sector. DG Swaminathan.

Swaminathan J:
So, on credit growth, of course, as you mentioned, overall, it is 14% year-on-year. But there are different components as you look at it. Agriculture has grown at what, December data shows, at 12%; Industry has grown at 13%; Personal loans have grown slightly upwards of 14%. So, it's more secular. It is not that any one particular segment has contributed less or more. Gold loans as a proportion to the total lending book is something that we will have to see. The percentages can be misleading. And that increase is not something which is unexpected, because primarily in the previous years, the unsecured personal loans had a major role in terms of contributing to the overall growth.

When banks move more towards safety, when there are higher slippages seen in certain segments like MFI or personal loans which are unsecured, collateralized loans will see a pickup. So, there has been a shift, but that shift has been also aided by the spurt in the gold prices, which is all right. But system level, the LTV ratio is still below 70%. Well, of course, we have even permitted, as Governor mentioned, slightly higher LTV. System level, it is below 70%. So, there is absolutely no concern in terms of, number one, you will have to look at the percentage in terms of the overall pie that it has in the bank credit. And second is that LTV levels are even comfortable at this point in time. So, there is no worry. And MSME, as Governor clarified, 15 years now. So, it is time that we relook at the numbers, and also be supportive of this. You would recall that last year we increased for agriculture segment as well to ₹2 lakhs. So, this is keeping in alignment with that, so that the smaller customers are not deprived of access to formal credit for lack of collateral. Thank you.

Brij Raj:
Thank you, Sirs. I will now request Piyush Shukla of Hindu Business Line to ask his question. Piyush, please.

Piyush Shukla, Hindu Business Line:
Thank you. Good afternoon, Governor and DGs. Thanks, Brij sir. Sir, couple of queries. First is, possibility of uptick in commodity prices, rupee pressure. Of course, you said Goldilocks has even improved. But on inflation side, if there is an upside, do you see there is? Or with the current pause, it means we are at terminal rate at 5.25%.

Second is, Sir, in the Government Union Budget that our Finance Minister presented, the subsidy for UPI has been slightly lowered. I just want to understand, Sir, some people in the payments industry, including the self-regulatory organization (SRO) that you have recognized for the payments body, they have suggested that we should not on the customer side, you mentioned we are very pro-customer, but on the higher value P2M (person to merchant) transactions, merchants of a certain category with a higher turnover rates, Croma and all with 0.03% MDR, because anyways on certain credit lines there is already merchant discount rate (MDR). Do you feel that that could be, and you had earlier mentioned, somebody has to bear the cost in your earlier remark. And I know, I will not get an answer for this, but Sir, any update on Tata Sons?

Sanjay Malhotra:
I was only stating the obvious that someone has to pay for the cost, right? Having said that, see, it is in the domain of the Government now. And I am very sure that we will certainly be able to find out a way of not only sustaining, but improving this very important payments infrastructure, which is so very unique in our country in the years to come, and even further improve it. So, there should not be any concern, especially from the customer's point of view. Similarly, for all the stakeholders, there should not be any concern. I think we will be able to find a sustainable way of sustaining this and improving it, going forward.

Piyush Shukla, Hindu Business Line:
Are we at terminal rate?

Sanjay Malhotra:
See, this is a question for the MPC to answer. As I mentioned, we will continue to be data dependent. And we are at a neutral phase, other than one member who has not voted, because we do not vote, but who wanted to change the stance from neutral to accommodative. All others are at neutral, which means that given the state of economy that is today and that we foresee going down ahead over a 9-month period, 1-year period, this is the rate that we expect it to be there. I may mention, however, that as already mentioned even in my policy statement, that we are in a good spot, earlier mentioned as Goldilocks. Inflation, especially, you know, your underlying inflation is low. It's much lower, even our forecast going ahead is much lower than the target. Headline, of course, can go up and down.

As mentioned, underlying inflation is very, very benign. And so, I do expect that the policy rates should continue to be at low levels for a long period of time. Whether they will go down even further, I will leave it for the MPC to decide, going forward.

Brij Raj:
Thank you, Sir. I will request Mahesh Nayak from Financial Express to ask his question. Mahesh, please.

Mahesh Nayak, Financial Express:
Thank you. Good afternoon, Sir. Good afternoon, Ma'am. Thank you very much for the opportunity. I just wanted to understand, Sir you spoke about liquidity and supporting liquidity in the system, but to just assess, what would be your assessment on the system liquidity, will it be comfortable between 0.6% to 1% of NDTL? And second just to ask is, with the trade deal round the corner, do we see a reduction in monetary policy support? Thank you. These are my two questions.

Sanjay Malhotra:
Monetary policy support I already mentioned. Let us not look at it as a kind of a support, the real rate of interest today is not very low. If you look at the real rate today, it's still high. But going forward, yes, you know we are in a accommodative phase. We are more or less you know at neutral, because the neutral we say is 1.4 to 1.9. So, if inflation going forward is 3.5 - 4.0 we are more or less 3 to 4, 3 to 4 is the range that we have. Then we are more or less neutral or below neutral rates. So, that space that as I mentioned we continue to be in this space. We will take it policy-by-policy with regard to this.

Brij Raj:
Thank you, Sir. I will request Sweta Roy of The Banker UK, FT to ask a question. Sweta, please.

Sweta Roy, The Banker UK, FT:
Hello, everyone. Thank you so much for the opportunity. The recent RBI bulletin highlights how the risk is being materialized very quickly in the system, be it coming from algorithms or interdependence, cyber threat and especially, as Mr. Swaminathan mentioned about the conduct risk, how it becomes at first, it becomes a confidence issue and later it becomes a liquidity problem. I would like to understand how does RBI plan to set up a more proactive supervisory measure considering all these risk factors? Thank you.

Sanjay Malhotra:
So, this is an area which we continuously work upon. We continuously try to improve our supervisory toolkit. Our effort has been more and more on being proactive, pre-emptive on a real-time basis. Our attempt has been to be more as I mentioned even earlier somewhere to be more offline and pre-emptive.

A number of measures we have taken in this regard. I request DG, Swaminathan to throw light on some of the measures that we have taken, number of measures on IT security, etc. even measures with regard to prudential risks, this work which is always in progress. Request DG to supplement.

Swaminathan J:
Just to supplement on this, as you rightly said the new types of risks that have emerged require not just a point-in-time supervision, so this is an ongoing effort. So, we have significantly augmented our supervisory toolkits to be more data-driven with insights provided by the off-site data that we are able to take from the system. As a regulator, as a supervisor we have enormous amount of real-time data that flows into us. So, risks are monitored more offline, less on-site.

The traditional tools largely rely on the on-site inspection, but this is something which is a calibration over the last 2-3 years. We have significantly augmented our capacity, so we are in a position to issue more real-time advisories to all the regulated entities. We keep doing that routinely. We have also put out very elaborate guidelines in terms of Master Directions for ensuring IT risk, cyber security, vendor management, third party risk management, outsourcing risk management guidelines. We will continue to augment these tools, and this is an evolving space as the Governor said, there is no goal post here. We will continue to respond to the emerging situation. And one thing which is a very redeeming feature is that almost every regulated entity realizes this. There is significant investment that is happening in terms of ramping up the operational resilience, that is our focus and supervision accordingly will evolve.

Brij Raj:
Thank you, Sirs. We will now take the remaining questions from our left side. To begin with, I will request Ekta Suri from Zee Business to ask a question. Ekta, please.

Ekta Suri, Zee Business:
Good afternoon, Sir. Sir, I just want to get one clarity, just now you said that the loss due to OTP is around ₹25,000, so even if the loss is of ₹1 lakh or ₹2 lakh, 15% will have to be borne by the customer, 15% will have to be borne by the bank. How will the remaining compensation be calculated? Will it be given by the RBI? And you mentioned one more point that it will be done one-time, what does this mean Sir, that if someone has lost more than once then how will it be reimbursed?

Sanjay Malhotra:
So, it is not given more than once because we want that after making a mistake once, the customer becomes alert and rectifies his mistake. A mistake can be forgiven once and that mistake can be reimbursed and that is why we have set a limit of one-time. And that is for a lifetime, not for a year. A person should learn from other people's mistakes but if not from others then at least learn from one’s own mistakes that is why we have set a limit ₹25,000. If the loss is of ₹50,000 then we will calculate 85% of it i.e., ₹42,500. Between ₹42,500 and ₹25,000, whichever is less will get ₹25,000. If the loss is ₹20,000, then 85% of the loss will be ₹17,000. And then of the two, ₹17,000 is less, so they will get that.

Ekta Suri:
I wanted to ask the question that, in the previous policy there was a discussion that if someone defaults his personal loan and buys a phone, then his phone will be locked. Has RBI dropped this plan or is it still on the table?

Sanjay Malhotra:
It is still under examination.

Ekta Suri:
Thank you, Sir.

Brij Raj:
Thank you, Sir. I will now request Falaknaaz Syed from Deccan Chronicle to ask her question. Falaknaaz, please.

Falaknaaz Syed, Deccan Chronicle:
Sir, based on your assessment, how much can the tariff reduction add to the GDP growth is my one question and second, while you have cut 125 basis points and infused almost ₹6 lakh crore liquidity, bond yields are refusing to budge down and today also yields have shot up by 4 to 5 basis points. So, how do you plan to address that?

Sanjay Malhotra:
See, it is still early days. We have not actually done an assessment of how much the trade deal will contribute to the GDP growth because see, right now we do not even have the details thereof. But we have still added to the GDP by about 20 basis points because of various reasons including the US trade deal. We will give out the numbers in the next Monetary Policy Statement. Regarding bond yields, I think I have already mentioned enough. I really do not have more to add. It will be our constant endeavor to proactively, preemptively continue to provide liquidity which we are hopeful will certainly transmit to all markets, all credit, money markets, bonds, all markets.

Brij Raj:
Thank you, Sir. I will now request Anurag Shah of ET NOW Swadesh to ask his question. Anurag, please.

Anurag Shah, ET NOW Swadesh:
Namaste Sir. Thank you, sir. In today's policy, your focus has been more on consumer-centric announcements which will benefit people. So, the mis-selling guidelines you have mentioned, it is more focused on the insurance sector, because the FSR (Financial Stability Report), which was issued by the Reserve Bank there was a lot of concern that the distribution cost, commission cost which is being given by the private life insurance companies will have a lot of effect on the penetration and affordability. Then we saw that taking cognizance of the same issue, this concern was also expressed in the Economic Survey as well. We have also raised this issue many times before you Sir that the credit-linked products, which are being sold by banks, increases the mis-selling. So, are the proposed guidelines in the context of insurance products? Sir, you have taken cognizance of this problem, which is much welcome.

Sanjay Malhotra:
First of all, I would like to say that if anyone is happy with our policy statement, then it will be Anurag who is sitting on the other side. It will be Anurag, because I have noted that he used to ask this question every time, every time he asked this question, what are you doing about it? So, he will be the happiest about this. So, it does not mean that we have brought this now and it was not in our knowledge. We have taken many steps towards this. I would like to say that although this type of mis-selling, if we look at the whole system then it is not much. It is very less, but for us every person is very important and keeping that in mind although from the perspective of percentage, it is not much, but still it is a concern for us and taking cognizance of the same, we have taken many steps to prevent mis-selling. We have included provisions related to dark patterns and other provisions, which we hope would be effective in preventing mis-selling.

Brij Raj:
Thank you, Sir. I will request Hitesh Vyas of Indian Express to ask his question. Hitesh, please.

Hitesh Vyas, Indian Express:
Sir, there is concern regarding shortage of small denomination currency notes. Is there anything RBI planning to address this issue?

Sanjay Malhotra:
See, we are very conscious of whatever are the needs for currency, we provide currency, whether it is short denomination or higher denomination, we provide all currencies. There is a review which we regularly do and basis that, printing and the management and circulation thereof is ensured. And we will continue to provide the currency needs of the country, including small currency notes. You would have noticed that currency in circulation has actually increased quite a lot in the last one-year, especially in the last one month or so. And so, it has increased only because we have provided it.

Brij Raj:
Thank you, Sir. I will request Ben Jose of The New Indian Express to ask his question. Ben, please.

Ben Jose, The New Indian Express:
Good afternoon, Sir. One is the clarification on the fraud payment 60%-70% of the money would be paid by RBI. Where that money would come from, the unclaimed deposits? And how much is the unclaimed deposit? RBI has taken many measures to enable people to get the money back. How much has been given back by banks and how much is the total pending amount? Any number?

Sanjay Malhotra:
Total number including interest is something like ₹85,000 crore, if I remember correctly. We did this campaign, you are aware. I think total amount including RBI and others that was returned, there were other regulators also involved in this. The total amount I think there is about ₹5,000 crore or so. Banking is also I think ₹3,500 crore to ₹4,000 crore, you can give the exact number if you have it?

Shirish Chandra Murmu:
Month-wise we are tracking. Like in the last policy also I had clarified this month-wise. It has gone up, and the amount of money being returned to customers, in fact if I have to give you the December figure it has gone up. Now December figure stands at ₹1,043 crore, November it was ₹802 crore and October ₹759 crore and like I said earlier before this campaigning, it was averaging around ₹100-200 crore. So, this actually had picked up and January figure is yet to come, and we believe it will be much better.

Sanjay Malhotra:
So, one clarification I want to add these are monthly figure so the total will be about ₹4000-5000 crore?

Shirish C. Murmu:
I don’t have the total figures on this.

Swaminathan J:
I thought you mentioned about the compensation will come out of unclaimed deposits. No, unclaimed deposits belong to the customers, so when they are claimed, they will be repaid. We have a Depositor Education and Awareness Fund which also includes unclaimed deposits. So, we have adequate income surplus that has accrued over a period of time. We may use that but at this point in time, I just want to clarify it is not from the unclaimed deposits. That belongs to the customers, we have to keep it in trust.

Brij Raj:
Thank you, Sirs. I will now request Lalatendu Mishra of The Hindu to ask his question. Lalatendu please.

Lalatendu Mishra, The Hindu:
Good afternoon. Governor, in your statement you have said about how the technology stocks are keeping the markets upbeat and recently there is a lot of concern about how a lot of investment is going into AI. What is your assessment Sir? Is there a disconnect between the real economy and the markets and what is your overall assessment of so much of money going into the technology?

Sanjay Malhotra:
Madam, you want to take this?

Poonam Gupta:
So, the statement is in the context of the global markets and the global economy. As you would have read over the past year or so over and over again there are two contradicting themes that are emerging. One is that there is potentially overheating in asset markets including equity market which is led by technology stocks and on the other side, despite all odds the real economy has held up very well and the connection between the two is that there is a productivity growth that is expected and is already materializing from technology that is fueling the real economy through investments. So, to a large extent I won’t be able to decompose it quantitatively. To a large extent, technology does have a bearing on real growth which is materializing. At the same time globally whether its reports by the IMF, BIS or even country-specific central banks, they have been flagging the risk that there is some amount of overheating. So, I think we are seeing these two narratives play out. So, the correction that one is seeing is something that has been anticipated

Lalatendu Mishra, The Hindu:
Thank you.

Brij Raj:
Thank you, Sir. Thank you, Madam. I will request Ashish Agashe of PTI to ask his question. Ashish, please.

Ashish Agashe, PTI:
Thank you, sir. Ma'am, just a small follow up on this. How do you look at AI and its general sort of impact on the economy given that a lot of employment, the stable and the better of the jobs are generated by the IT sector and also remittances because we depend on remittances a lot. So, as the tech-sector globally faces some bit of headwinds, how do things move? And also, Swaminathan Sir a small follow up, how much is the depositor education fund right now? How big a corpus is it? And if we were to run back a ₹25,000 ceiling compensation, how much of payments were to happen say in FY2024-25 or 2023-24? What is the capability there, Sir? Thank you.

Poonam Gupta:
So, recently internally we did a survey of the existing literature on the impact of AI on productivity and employment. So, the range is quite wide. The range is not negative, actually as of now. Certainly, on the productivity side, good numbers to high numbers. On employment while the evidence is or even hypothetically is difficult to talk about, but whatever surveys have been done, whether internationally or domestically in India as of today, is showing a net positive effect. So, with any technology there is churning that happens, but net employment effect so far has been positive. The churning is that some people lose jobs and others gain and so then the challenge lies in transition. Transitioning the skills in labour markets towards the faster growing segments and the sense is that this is how it will play out.

Swaminathan J:
On the DEA Fund to clarify as Governor mentioned, it is about ₹85,000 crore plus of unclaimed deposits plus the income accrued on it over the period. So, the whole thing is kept as DEA Fund and on the second part of your question in terms of what is the estimation, we are at this point in time trying to put a framework, not made any accurate estimates. We would actually want the frauds to come down. We do not want to make an estimate of what we should do, but essentially more than two-thirds in number is small value frauds, but in value they constitute less than 15%. So, it is that particular segment who have unwittingly become victims of such frauds is what we are trying to cover. So, financial impact may not be very high, but a large number of customers may be provided some solace. That is the intention with which we are trying to bring this.

Brij Raj:
Thank you, Sir and thank you, Madam. Last question from our left side from Jeevan Bhawasar of Akashvani. Jeevan, please.

Jeevan Bhawasar, Akashvani:
Namaskar Sir. Sir, the recent trade deals that have been done, how much impact are we expecting on our rupee recovery?

Sanjay Malhotra:
Trade deal has not been done yet. It has just been announced. You must have seen how much rupee has strengthened after the announcement. Around ₹1.5 (per USD), it has strengthened. The impact of the trade deal will be determined once the trade deal is completed and depending on details of the deal.

Brij Raj:
Thank you, Sir. We will now take the remaining questions from the right side. I request Aaryan Khanna from Informist Media to ask his question. Aaryan, please.

Aaryan Khanna, Informist Media:
Thank you, sir. Good afternoon. Sir, you mentioned that the corporates have upped their loans from banks and bank credit has been on the uptake. On the other hand, corporate bond issuance has fallen year-on-year as of April-December. Now, there has been an uneven transmission to both rates, both lending rates as well as corporate bonds. Has there been a conscious effort of the central bank and then in the context of the SEBI and the Government also bringing about more changes to deepen corporate bond markets? Do you expect this sort of ratio or this change in lending activity to continue going ahead? Thanks. And just one clarification if I could get it from DG Gupta. The weighted average call rate (WACR) fell below the liquidity adjustment facility (LAF) corridor on Wednesday without any RBI action. Can we expect any action going forward on that? Thank you.

Sanjay Malhotra:
So, action. See as I already mentioned, we target the WACR. So, it will be our effort that the call money rate remains at the policy repo rate. However, when there is as I mentioned monetary policy transmission still happening, it can be as it has been even in earlier times it can be lower than that. I do not expect it to be lower than the standing deposit facility rate of 5% which it is there one day. Average has been seen 5.25% or so for the last 1 month. Average is still on target. What was your first question?

Aaryan Khanna, Informist Media:
Sir, on bank credit.

Sanjay Malhotra:
On bank credit and bond, see, again this is a cycle now because your bank interest rates are lower so that is why there is a shift. But over a long period of time, if you see, the corporate bond market, now about ₹55 lakh crore or so, it has increased. It used to be about ₹15 lakh crore or so some 10 years ago, so this is going to increase. It will continue to increase, and I think that is a healthy trend over the long term, medium to long term. Short term because the interest rates are still aligning. It is quite possible that bank credit to corporates increase and lending from other markets decrease.

Aaryan Khanna, Informist Media:
Thank you, Sir.

Brij Raj:
Thank you, Sir. I will now request Jaspreet Kalra of Thomson Reuters to ask his question. Jaspreet, please.

Jaspreet Kalra, Thomson Reuters:
Thank you, sir. Good afternoon. Governor, if I could take you back to the Economic Survey for a second. The Economic Survey referred to the rupee as undervalued and not reflective of fundamentals. Would you agree with that assessment and as a sort of rejoinder to that, would the rupee recovery also be actively utilized by the central bank to clean up its forward book which is about $60 billion in dollars on the short side? If you could shed any light on that and if I could add on a small one here, any details you can offer on the Banking Reform Committee that was spoken about in the Budget what will be the subject areas it looks at? Thank you.

Sanjay Malhotra:
Rupee, see as I mentioned, we do not target any level. You have to ask the CEA, but we do not target any level. Any undue volatility, again any excessive volatility, normal movement that is something which we are concerned with, we should be concerned with and that is what we try to curb and we will continue to do that. Minus that we do not target any price level. And then what was your other question?

Jaspreet Kalra, Thomson Reuters:
The Banking Reform Committee, but if I could add on, Sir.

Sanjay Malhotra:
High Level Committee, see, it is for the Government, let us wait. I think it is for the Government. The Government will set it up. The Finance Minister is on record to say that they have not yet finalized the terms of reference. That is all I can add.

Brij Raj:
Thank you, Sir. I will request Shyama Mishra of Doordarshan to ask her question. Shyama, please.

Shyama Mishra, Doordarshan:
Namaskar, Sir. Sir, you mentioned that these deals, various deals, they will support the exports in the medium term. What according to you think are required, the steps required for sustaining the export growth for a longer period?

Sanjay Malhotra:
No, I said that from near to medium term and long, it is not only medium, it will continue, I said. So, when I said it does not mean it will stop. I am looking at that kind of a horizon, near to medium term when its effects will start becoming visible. I hope that clarifies. And once they are there they should continue for a long period of time and a lot will depend on how the Indian industries and enterprises are able to seize those opportunities.

Shyama Mishra, Doordarshan:
Sir, on that the lagged credit for the senior citizens, can you elaborate on that?

Sanjay Malhotra:
Let’s wait for the discussion paper. We will have more details. It is only a discussion paper. These are thoughts to what extent they can be implemented. We will have to consult all stakeholders. The only point is that this is an issue which is engaging everyone's attention, and we have also been looking into it. We want to consult all stakeholders and see as to how this can be further improved. You are aware that the Government of India, Ministry of Home Affairs recently came out with a standard operating procedure (SOP) for the LEAs (law enforcement agencies) as to how to take care, how to respond when such kind of frauds are reported to them. And in the same light, we came up with some measures and we will also come up with some more additional measures in the discussion paper. Let’s wait for it.

Brij Raj:
Thank you, Sir. I will now request Anshika Kayastha of Mint to ask her question. Anshika, please.

Anshika Kayastha, Mint:
Thank you. Good afternoon, Sir. Sir, my question is on Agri loans. You have announced the review of the KCC framework today and in the Q3 earnings, a couple of private banks - the large private banks also mentioned a regulatory led misclassification of some amount of Agri loans as priority sector loans. Prior to that, even before the gold loan norms, new gold loan norms that have come out, we saw some amount of overzealous lending by PSU banks in agri-linked gold loans for, again, consumption purposes. What I am trying to understand is whether the RBI has observed or is concerned about a certain level of exploitation, if I may use the word, of agri loans by banks at a system level, and if that is one of the reasons that you may want to re-look the KCC framework? And a second quick follow-up on the High-Level Banking Committee announced in the budget. Of course, the Committee is still to be set up, but would the RBI be in the loop about maybe any problem or focus areas that the Government may want to focus on under the Committee or may want to look at under the Committee? Thank you.

Sanjay Malhotra:
See, on your second question, I don’t have anything more to add as to what the terms of reference will be and how the RBI will be involved. It is the Government's prerogative, and they will take a call on it. First question on KCC loans, I will ask DG Swaminathan to fill in the details, but as far as I am concerned, it is not at a system level. These are issues which keep getting flagged on a bank-to-bank individual cases. At a system level, there is no cause for concern. I will ask DG Swaminathan to answer.

Swaminathan J:
Just to supplement on that. Essentially this KCC review is part of our periodical review of all guidelines. It is almost 5 years now. So, this is a periodical review that we have undertaken and we are also modifying certain contours as regards the crop season, the time allowed per season and also the overall validity period of the KCC and this particular revision has got nothing to do with any of the recent incidents that you are alluding to. This is a periodic review and you will have the details once we put out the guidelines in place. The second, as clarified by Governor, in a couple of banks, certain deviations were found in terms of classification of PSL. It is certainly not something which is found on a system-wide basis. These are some outlier classification that we call out and the banks accordingly do a reclassification. So, this is not, you can be rest assured that there is no system level issue and nor this case's revision is in response to such one-off events.

Brij Raj:
Thank you, Sirs. We now come to the last question of the press conference. For this, I will request Saurav Mukherjee of ANI. Saurav, please.

Saurav Mukherjee, ANI:
The question is on the RBI proposal that banks can now lend to real estate investment trusts (REITs) under certain terms and conditions. My question to you is what this means for the sector and the second, will this increase credit liquidity for real estate development? Thank you.

Sanjay Malhotra:
Yes, the answer to both is yes. It will help the real estate sector and the real estate InvITs, REITs as they are called. See, there is already a framework for lending by the banks to the real estate. Only through companies and other legal entities that lending was not allowed to be done in case the borrower was a REIT. So, now it is being extended even to REITs as lending has already been allowed for InvITs, lending for infrastructure purposes. So, it is just an expansion instead of lending at the company level or the entity level, the lending can now move up at the trust level. So, that we think is a positive both for the banks as well as for the real estate sector and the real estate companies.

Sanjay Malhotra:
If there are new questions. It should not be a repeat of the same. One by one, last two.

Anup Roy, Bloomberg:
Sir, I wanted to ask this question that when Rupee was depreciating...

Sanjay Malhotra:
You already asked about Rupee, no?

Anup Roy:
No, I didn't ask.

Sanjay Malhotra:
I mean others have asked.

Anup Roy, Bloomberg:
So, the thing is that you were pretty off-hand in intervention. When now rupee appreciates because of the trade deal, will you be having the same approach?

Sanjay Malhotra:
Any excessive volatility, any excessive volatility, if it is there. We don’t intervene normally, please. Whether it is an up movement or down, depreciation or appreciation, we don't. Generally, we stay away. However, it doesn't mean that we will stay away even if there is speculation getting built in. When there is an appreciation of the rupee happening, I don't see as of now or even going forward, I do not see any kind of speculative element getting built in. So, if it is not there, we let you know the markets play out and see where the rupee is headed, whether it is with respect to the dollar or whether it is with respect to any other currency.

Ekta Suri, Zee Business:
Sir, my question is that we have been running this campaign on Zee Business since COVID-19 and especially in past 1-2 years on the misbehavior of recovery agents and use of abusive language. If someone is getting a call, or being threatened, what should the customer do? Because they trust a bank or an NBFC and if no one is listening there, then what should the customer do? Because here unfortunately there are many cases where people commit suicide due to fear. So in such cases, what recourse does a customer have?

Piyush Shukla, Hindu Business Line:
Governor Sir some of these BNPL (Buy Now, Pay Later) type platforms what they do is, you must monitor social media also you just go on X and see how many people are posting photos of recovery agents, third party recovery agents messaging on WhatsApp and all, calling on WhatsApp. You block one number, they will message you from different numbers, which is in direct violation of the recovery guidelines.

Sanjay Malhotra:
So, for that, we have strengthened and consolidated the direction that such behavior of recovery agents should not be there and if any such behavior is there, then there is a provision that the regulated entities should publish on the website the ways for customers to lodge complaints so that they can reach to the general people. And if they do not get any relief from there, then they can come to the RBI or Ombudsman after that.

Brij Raj:
Thank you, Sir. With your permission, Sir, we will now conclude this press conference. I would like to thank you, Sir and our Top Management for patiently answering all the questions and making this interaction so engaging and interactive. I also thank all members of the media for their participation and wish you all a pleasant day ahead. Thank you very much.

Distinguished guests and my colleagues, Namaste and a very good afternoon! It is a privilege to address this illustrious gathering at College of Supervisors’ Third Annual Global Conference convened around the theme of ‘Adapting the Regulation and Supervision to the Digital Age’.

2. Digitalisation has brought significant benefits such as efficiency and productivity gains, improved transparency, enhanced competition and expanded access to financial services. At the same time, it is also creating new categories of risk and reshaping familiar risks in unfamiliar ways, altering their transmission, visibility, and controllability. The digital transverses beyond products, platforms, or processes to organizational structures, partnerships, and information flows, and with enhanced speed and scale, fundamentally altering the nature of how risks emerge and spread, and how trust is built or undermined. These shifts compel regulators to revisit the operating assumptions of their regulatory approaches. Trust, a cornerstone of financial stability, is increasingly being forged through digital channels, presenting regulators with the challenge of balancing innovation against risk.

3. Building on this, I will first touch upon some issues and challenges that digitalisation presents for regulators, and I will then turn to the opportunities it offers for developing more effective and forward-looking regulatory approaches. I will conclude by outlining a set of guiding principles that, in my view, should anchor regulation in the digital age.

I. Issues and Challenges for Regulation in the Digital Era

A. Regulatory Agility

4. Digitalisation has compressed the time dimension in finance. Transactions settle instantly, services operate continuously, and decisions across payments, credit, and markets are executed automatically at machine speed. This has narrowed the time available between early warning and realised impact; with the risk that operational incidents, fraud, or loss of confidence may scale rapidly, even before conventional indicators register meaningful deterioration. Accordingly, the regulatory processes historically designed around reporting cycles and post-facto remediation must also evolve towards proactive detection and agile interventions without sacrificing prudence and quality of regulatory judgement.

5. New applications and business models are emerging with increasing frequency, thus challenging the regulators on the appropriateness and speed of regulatory response. Frequent changes to regulations can create uncertainty and compliance fatigue, while delayed adaptation risks leaving material developments inadequately addressed. Regulation must therefore maintain an optimal balance between durability and responsiveness.

B. Regulatory Perimeter and Fragmentation

6. Digitalisation is also blurring traditional regulatory boundaries. Many of the financial activities are now being unbundled and delivered through non-financial platforms and arrangements involving both regulated and un-regulated entities, that do not fit neatly within the existing regulatory scope of RBI. Oversight of such activities is often fragmented among multiple financial and non-financial regulators with no single authority having a comprehensive, end-to-end view of the entire activity chain and risk transmission pathways. Hence, regulatory actions taken within individual mandates may be sound in isolation yet collectively may not fully address such cross-cutting risks.

7. The challenge lies in the ability of sector-specific regulatory frameworks to remain coherent when digital financial activity cuts across them by design. Reflecting this, international experience indicates a range of approaches—from legally anchored extensions of regulatory reach, such as Digital Operational Resilience Act in European Union², to collaborative forums with industry experts, like Singapore’s Cyber and Technology Resilience Experts (CTREX) Panel³. RBI has adopted a hybrid approach that integrates elements of both activity-based such as directions on credit and debit cards and entity-based such as prudential norms, to ensure resilience of its oversight mechanisms.⁴ It is complemented by elements such as framework for supervision of financial conglomerates⁵, directions for non- financial holding companies⁶ and inter-regulatory platforms under the aegis of Financial Stability and Development Council⁷, which help in combined assessment of risks from the financial stability perspective.

8. Fragmentation across jurisdictions further complicates the oversight of digital financial activity. Difference in legal frameworks, institutional mandates, and domestic policy priorities can lead to divergent regulatory approaches which may create scope for regulatory arbitrage and uneven risk management, thereby underscoring the importance of effective cross-border co-operation⁸.

C. Nature of Regulation

9. It is often seen that prescriptive regulations become misaligned as technologies and business models evolve. Conversely, principle-based regulation introduces scope for interpretation and uneven application, if not supported by strong governance and supervisory engagement.⁹ The challenge of regulators, especially with respect to digital technologies, lies in calibrating regulation to have clarity without rigidity and flexibility without ambiguity. As international experience suggests, principle-based regulation, accompanied by a mature industry with strong governance structures, continuous engagement of regulators with the industry, an enhanced supervision and suitable enforcement, yields more successful results.

D. Financial Stability

10. Digital innovations like usage of cloud and decentralised finance introduce new and potentially systemic risks, owing to increased interconnectedness with unregulated entities like technology providers, single points of failure, opacity of underlying arrangements and diluted accountability. As systemic fragility can emerge without any single entity appearing vulnerable, regulators are required to look beyond entity-level soundness to systemic effects of concentration, limited substitutability, and the potential for disruption when widely relied-upon services are impaired.

11. The increasing use of models, algorithms, and code across financial industry is reshaping how outcomes are generated. However, their limitations such as explainability, embedded bias, and model drift may not be immediately apparent, and may emerge only as these technologies gain scale. The overarching framework such as in the report of Committee on Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI)¹⁰ may be helpful but needs to be translated into appropriate regulation with the underlying principle that the accountability from usage of such technologies, lies with the regulated entity.

E. Operational Resilience

12. In today’s financial system, data has become a core asset. As financial institutions collect and process vast amounts of sensitive personal and transactional information, they have become increasingly attractive targets for cyberattacks. The use of technologies for fraudulent activities like impersonation, fabricated identities, and synthetic content is reducing the reliability of traditional checks dependent on stable identity and familiar patterns. The challenge is to come out with regulations promoting innovation while enhancing safeguards for operational resilience and the Guidance Note on Operational Risk and Resilience¹¹ issued by RBI is a good example of this.

13. Another emerging challenge for regulators is the veracity of information, as digital platforms enable information, whether accurate or distorted, complete or incomplete, to circulate rapidly. The distorted information can influence consumer behaviour and market sentiment potentially amplifying stress and contagion. In such environment, a clear, targeted and timely regulatory communication assumes greater significance for anchoring stakeholders’ confidence.

F. Capacity

14. Digitalisation has materially expanded the scope and sophistication of issues that fall under the regulatory domain. Regulatory judgement increasingly requires understanding technology-enabled business models, data-driven decision systems, digital operational processes, and fast-evolving risk transmission channels, which place sustained demands on regulatory capacity. Regulators should proactively attract, retain, and effectively deploy talent ensuring that expertise is well embedded across regulatory teams.

II. Opportunities for Regulation in the Digital Era

15. The same forces that generate challenges for regulation in the digital era also create opportunities for the regulator by enabling them to continually assess and adaptively calibrate their approaches – not by expanding their reach but by improving how risks are observed, assessed and addressed.

A. Proactive Regulation

16. Digital financial activity generates granular, high-frequency information across transactions, operations, and channels, creating the opportunity for early and deeper regulatory assessments of emerging issues, such as incipient stress, anomalous behaviour, or deterioration in controls, helping them time and calibrate their regulatory interventions. RBI’s machine learning tool- MuleHunter.ai is an example of its digital intervention to tackle the problem of mule bank accounts plaguing the digital ecosystem.¹²

B. System Wide Visibility

17. As alluded to earlier, many digital-era risks arise through shared dependencies, common technology choices, and interconnected infrastructure. Advances in data availability and analytical tools can be used by regulators to look through these complex chains of dependencies and interconnections to identify critical nodes and assess concentration and other intersecting risks. This helps in not only having a more coherent view of risk but also anticipating system wide disruptions even though individual entities appear resilient; as also assessing of the second-order effects of such disruptions - like a cyber incident triggering liquidity stress.

C. Regulatory Calibration

18. Digitalisation creates scope for regulator to become more adaptive. A granular understanding of activities, exposures, and risk drivers, facilitated through digital tools provides an opportunity to operationalise proportionality with greater precision. At the same time, digital tools help regulators incorporate feedback from incidents, near-misses, market developments and supervisory experience more systematically into regulations supporting a mature and stable regulatory posture.

D. Reducing Regulatory Burden

19. The availability of richer data and more advanced modelling tools enables regulators to undertake regulatory impact assessments and cost–benefit analysis in a more structured and forward-looking manner supporting reasoned regulatory choices. RBI through the Framework for Formulation of Regulations has institutionalised such structured decision-making which inter-alia includes impact assessments, periodic review of regulations and broadened stakeholder engagement through ‘Connect 2 Regulate’.

20. Reduction in compliance burden is another use case for regulators, which RBI has been actively working on by embedding digital processes within its regulatory and supervisory functions. All regulatory services are now delivered through an end-to-end centralized digital portal PRAVAAH¹³. DAKSH¹⁴, also an end-to-end supervisory workflow application, enables focused monitoring of compliance, supervisory processes and communication, as also cyber incident reporting.

E. Regulatory Capabilities

21. The use of technology by both regulators (SupTech) and regulated entities (RegTech) supports more efficient supervisory processes and compliances, including automated reporting, targeted analysis, and shift away from static documentation, enabling effective risk management and outcomes. RBI’s Advanced Supervisory Analytics Group is increasingly using digital techniques for microdata analytics, governance assessment, social media monitoring, assessing borrowers’ fraud vulnerability model, etc¹⁵

22. From a conduct perspective, digital tools can help improve the ability to assess information- both structured and unstructured on consumer grievances, their resolution, service disruptions, mis-selling, etc. This helps in earlier supervisory engagement and more evidence-based intervention supporting consumer protection and financial inclusion outcomes. The Complaint Management System of RBI is progressively making use of such tools.¹⁶

F. Regulatory Cooperation

23. As pointed out earlier, digital infrastructures and service providers operate across institutional and jurisdictional boundaries by design. Digital tools can support faster information sharing and joint analysis for consistent regulatory outcomes in cross-border and cross-sectoral contexts, particularly for common critical third parties. RBI has been continuously engaging with domestic and international regulators and standard setting bodies to further such collaborative efforts.

III. Principles for Regulation in the Digital Era

24. I would like to end by laying down some guiding principles about how a regulator should think, decide, and act in the digital era.

1. Primacy of Public Interest: Regulation must remain anchored in its core objective of financial stability and customer protection.

2. Risk-based Focus: Regulatory focus should be directed at the risks beyond institutional form, legal structure, or delivery channels.

3. Enforce Accountability: Technological intermediation, or processes must not dilute accountability of regulated entities, even though responsibilities are shared.

4. Proportionate Calibration: Regulatory intensity should be calibrated to the materiality, complexity, and systemic relevance of activities.

5. Data, Experience, and Foresight: Regulatory decision-making should draw on data, supervisory experience, and forward-looking judgement.

6. Adaptive Refinement: Regulation should continually evolve.

7. Outcome Orientation: Regulatory expectations should focus on desired outcomes and risk controls, allowing flexibility in implementation, while avoiding the prescription of specific technologies, architectures, or models into regulation.

8. Resilience by Design: Regulatory frameworks should focus on the ability of entities and systems to absorb shocks, maintain continuity of critical functions, and recover in an orderly manner.

9. Effective Communication: Regulatory communication should be clear that supports confidence and stability without prejudging outcomes or constraining future regulatory action.

Conclusion

25. Let me conclude with a reflection that extends beyond regulation. The digital era is steadily compressing the distance between action and consequence. Actions now travel faster, interact more widely, and compound more quickly than before. In such a setting, the central challenge is not uncertainty itself, but the quality of judgement exercised while outcomes are still unfolding.

26. In this environment, the value of regulation lies in its ability to serve as a stable reference point while everything else is in motion. When it is grounded in evidence, experience and is forward-looking, regulation can shape the trajectory of change rather than merely respond to it. That is how innovation moves forward with confidence, and how trust in the financial system is endured.

Thank you and wishing constructive deliberations and exchange of views.

¹ Special Address delivered by Shri Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India on January 9, 2026, at the 3rd Annual Global Conference of the College of Supervisors, Reserve Bank of India on the theme of ‘Adapting the Regulation and Supervision to the Digital Age’, in Mumbai. Inputs provided by Chandni Trehan Saluja and Bharadwaj Bantu are gratefully acknowledged.

² - https://www.eiopa.europa.eu/digital-operational-resilience-act-dora_en

³ - https://www.mas.gov.sg/who-we-are/mas-advisory-panels-and-committees/cyber-and-technology-resilience-experts-panel

⁴ https://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1519

⁵ https://rbi.org.in/Upload/AnnualReport/Docs/56244.doc

⁶ https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13213&Mode=0

⁷ https://dea.gov.in/files/inline-documents/FSCS.pdf

⁸ International Regulatory Co-operation – Policy Brief by OECD April 2020

⁹ https://www.fsb.org/uploads/P160724-2.pdf and https://www.bis.org/fsi/fsipapers19.pdf

¹⁰ https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/FREEAIR130820250A24FF2D4578453F824C72ED9F5D5851.PDF

¹¹ https://rbidocs.rbi.org.in/rdocs/Content/PDFs/OPERATIONAL28112025BA9ABE54217D47C89EAEAEA9A649ED11.PDF

¹² https://rbihub.in/projects/mulehunter

¹³ Paragraph I.20 of Report on Trend and Progress of Banking in India 2024-25

¹⁴ https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=54503

¹⁵ Para VI.60 of RBI Annual Report 2024-25

¹⁶ Para VI.93 of RBI Annual Report 2024-25