Digitalisation has expanded access to financial services while creating new categories of risk, says RBI Deputy Governor

Shirish Chandra Murmu, Deputy Governor, Reserve Bank of India (RBI) has stated in a latest speech that 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. Murmu stated that 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. He noted that the digital era is steadily compressing the distance between action and consequence and in this environment, the value of regulation lies in its ability to serve as a stable reference point while everything else is in motion.

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