What Malhotra is worried about
Speaking in New Delhi on Saturday, Sanjay Malhotra urged regulators to expand their risk radar to cover threats that are increasingly "exogenous." "It may begin with a geopolitical event, or cyber attack or a technological failure that affects the financial system through multiple channels," he said. He noted India remains vulnerable to the war in Iran via higher commodity prices and "external sector pressures," even as the economy navigates this phase "from a position of strength."
Malhotra also echoed Finance Minister Nirmala Sitharaman's warning last month about artificial intelligence, which she called a "double-edged sword" that can both speed up fraud detection and fuel larger, more sophisticated cyberattacks.
Stability, transmission, and where policy fits
Malhotra called financial stability "the foundation on which price stability rests," essential for monetary policy to transmit effectively and for the economy to reach its potential. To beef up resilience, he said "we must aim to better understand" how interconnectedness and contagion channels can spread stress.
He added that, although the RBI generally refrains from relying on monetary policy to deal with financial-stability concerns, they still figure into policy debates because "monetary policy can get in all the tracks." The RBI plans to reveal its monetary policy decision on Wednesday, and with prices climbing more quickly in Asia's third-largest economy, most economists anticipate a rate hike.
Central bankers are now watching cyber attacks and geopolitics, not just inflation prints. Market Briefs covers that widening risk map free every weekday.
The resilience check
Malhotra said the banking system is robust and well capitalized, giving India a solid base, but he warned against letting that confidence erode vigilance. "Today's resilience may not necessarily imply tomorrow's immunity, and we are committed to remain vigilant of emerging vulnerabilities and continue to keep our financial system strong and resilient."
According to the RBI's June Financial Stability Report, the share of nonperforming assets across 46 Indian banks may edge up to 1.9% of all advances as of March 2028, compared with 1.8% as of March-end this year. Meanwhile, GDP expanded 7.8% in the April to June quarter, a pace that could give policymakers more room to lift borrowing costs without materially denting demand.
What to watch next for your money
Keep an eye on Wednesday's policy call and how the RBI frames inflation and stability. Recent analysis has highlighted a $133 billion liquidity overhang pushing policy in a more hawkish direction, a pickup in economic activity in September, and an economy that looks resilient while geopolitics and weather remain key swing factors. Translation for your wallet: the growth backdrop is solid, but the risks the RBI is watching are just as likely to come from outside finance as within it.
The next shock probably will not start inside a bank at all. Get Market Briefs free each morning and watch the whole board.
