Full Breakdown
RBI Governor Sanjay Malhotra Warns of AI-Driven Asset Repricing and Calls for Broader Financial-System Resilience
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Governor’s Address at the Fifth Kautilya Economic Conclave
On October 3, Reserve Bank of India (RBI) Governor Sanjay Malhotra delivered the keynote speech at the Fifth Kautilya Economic Conclave in New Delhi. He framed the rapid expansion of artificial intelligence (AI) as a major support for global equity markets, while cautioning that a slowdown in AI investment could trigger sharp repricing of assets across the AI value chain. Malhotra emphasized that India’s macroeconomic fundamentals and the resilience of its banking and non-bank financial institutions position the country to absorb external shocks, but he warned against complacency.
AI Valuation Correction and Potential Capital Inflows
Malhotra noted that elevated AI-linked valuations in advanced economies are vulnerable to correction. He argued that such a correction could redirect overseas capital toward India, potentially boosting equity inflows. The governor stressed that India’s equity markets have already adjusted from earlier overvaluation, and the current correction could be “orderly” if it materializes.
Emerging Systemic Risks Beyond Traditional Banking
Beyond AI, Malhotra identified four additional systemic risks: high global debt, leverage in non-bank finance, private credit, and cyber threats. He highlighted that future crises may stem from exogenous events—geopolitical shocks, cyber-attacks, or technological failures—that can propagate through cross-border financial networks. The RBI’s focus, he said, should be on building a financial system that can absorb shocks without amplifying their impact, rather than attempting to eliminate every risk.
Official Statements & Responses
In summarizing his remarks, Malhotra urged regulators to deepen understanding of inter-dependencies and contagion channels, and to make scenario analysis a core component of risk management. He called for more granular data on non-bank financial intermediaries, technology dependencies, and cross-border exposures, asserting that data quality will shape future risk assessments. While acknowledging the benefits of AI, tokenisation, and new financial intermediation forms, he insisted that innovation must preserve sound institutions, settlement finality, and financial integrity.
Verbatim Quotes
- “The AI investment cycle has been a major support for global markets,” — Sanjay Malhotra, capital RBI governor
- “As for corrections in AI-related valuations, if they were to happen in advanced countries... it may have a positive impact in terms of capital inflows,” — Sanjay Malhotra, capital RBI governor
- “Risks are increasingly exogenous, cross-border and interconnected,” — Sanjay Malhotra, capital RBI governor
- “Today's resilience may not necessarily imply tomorrow's immunity,” — Sanjay Malhotra, capital RBI governor
- “It is not that I see any imminent signs of stress,” — Sanjay Malhotra, capital RBI governor
- “But we need to remind ourselves that we need to remain alert to these risks.” — Sanjay Malhotra, capital RBI governor