Prelims: Current events of national and international importance | Economy
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Recently, the RBI Governor Sanjay Malhotra highlighted 5 priorities for maintaining financial stability at the 5th Kautilya Economic Conclave.
5 Priorities for Financial Stability
Build Systemic Resilience
- Financial stability does not require the prevention of all shocks.
- The emphasis should be on absorbing shocks and preventing their amplification.
- Shocks may be categorized as follows:
- Endogenous shocks originate within the financial system.
- Exogenous shocks originate outside the financial system.
- The financial system should maintain its core functions even during severe shocks.
Assessment of Emerging Systemic Risks
- Systemic risks are increasingly cross-border, interconnected, and external.
- Potential future crises may arise from geopolitical events, cyberattacks, or technological failures.
- It is essential to identify interdependencies and channels of contagion.
- Scenario analysis should serve as a central component of risk management.
Enhancing Monitoring and Data Collection
- More comprehensive and granular data are required to improve risk assessment.
- Current data gaps are evident in the following areas:
- Non-bank financial institutions (NBFIs)
- Interconnected financial exposures
- Dependencies on technological infrastructure
- Cross-border financial positions
- Improved data quality directly enhances the effectiveness of risk assessment.
Ensure System-wide Resilience
- Resilience must encompass the entire financial system, not solely the banking sector.
- Key components include the following:
- Banks
- Non-bank financial institutions (NBFIs)
- Financial markets
- Payment systems
- Technology infrastructure
- Critical third-party service providers
- Cross-border financial networks
- Financial instability originating in a single sector has the potential to propagate throughout the entire financial system.
Ensure Trustworthy Financial Innovation
- Key Emerging Technologies
- Artificial Intelligence (AI)
- Tokenisation
- Novel Forms of Financial Intermediation
- Financial innovation must enhance, rather than undermine, public trust.
- Essential Elements to Preserve
- Robust Institutional Frameworks
- Settlement Finality
- Singleness of Money
- Financial Integrity
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5th Kautilya Economic Conclave
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- It is an initiative of the Institute of Economic Growth (IEG).
- Held in – New Delhi from 3 to 5 October 2026.
- Organised with – Ministry of Finance.
- Theme – “Resilience in an Age of Flux”.
- First convened in – 2022, the Conclave provides a forum for dialogue on contemporary economic and policy challenges.
- Earlier edition’s themes
- “Redefining the Future” (2022),
- “Navigating a World on Fire” (2023),
- “The Indian Era” (2024) and
- “Seeking Prosperity in Turbulent Times” (2025).
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Reference
The Hindu | RBI Governor’s 5 Priorities for Financial Stability
