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The RBI Governor said the world economy had shown considerable resilience despite repeated disruptions since the COVID-19 pandemic.
RBI Governor Sanjay Malhotra (IMAGE: PTI/File)
Reserve Bank of India (RBI) Governor Sanjay Malhotra on Saturday cautioned that extended periods of financial stability could encourage excessive risk-taking and leverage, urging policymakers and financial institutions to stay alert even when markets appear resilient.
Speaking about the evolving global financial landscape at an event in Delhi, the RBI Governor said the world economy had shown considerable resilience despite repeated disruptions since the COVID-19 pandemic. India, too, has experienced a prolonged period of financial stability, he stated.
“…We have had long periods of financial stability globally. The world has weathered repeated shocks starting from COVID and has been rather resilient. Even in India, we have had a very prolonged period of financial stability… These very prolonged periods of stability can encourage risk-taking and leverage. Fading memories of past crises can weaken the appetite for prudence… We need to remind ourselves that we need to remain alert to these risks…,” he remarked.
RBI Chief Flags Rising Financial Risks
However, the RBI Governor warned that such stability could itself create vulnerabilities as memories of previous financial crises fade.
“Fading memories of past crises can weaken the appetite for prudence… We need to remind ourselves that we need to remain alert to these risks…,” he cautioned.
Malhotra also pointed to broader changes in the global economic order, saying the framework that supported decades of globalisation, economic integration and relative stability is now facing significant pressure.
He cited geopolitical and geoeconomic fragmentation, strategic realignment, trade restrictions, recurring supply disruptions, technological changes and climate risks as factors that are increasingly interacting with one another in unpredictable ways.
“Banking and financial stresses can build overnight, but they will take years to resolve… The international order that emerged post the Washington consensus, providing the broad framework for decades of globalisation, economic integration, and relative stability, is under considerable strain,” he further said.
According to Malhotra, these developments have direct implications for central banks, which can no longer assess monetary and financial stability in isolation from broader global economic and geopolitical shifts.
“Geopolitical and geoeconomic fragmentation, strategic realignment, trade restrictions, repeated supply shocks, technological disruption, and climate change are interacting in ways that are difficult to predict… For central banks, this has important implications. We cannot look at price and financial stability in isolation from these developments,” he concluded.
His remarks come amid heightened uncertainty in the global economy, with policymakers facing the challenge of balancing growth and stability while preparing for risks that may emerge rapidly across financial markets.
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Ask News18RBI Governor Sanjay Malhotra cautioned that prolonged periods of financial stability can encourage excessive risk-taking and leverage as memories of past crises fade. He noted that policymakers and financial institutions must remain alert even when markets appear resilient.
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Manisha Roy is a Senior Sub-Editor at News18.com, with over 7 years of experience in journalism. She covers politics and a wide range of hard news, with a keen interest in national and international d…Read More
October 03, 2026, 3:12 PM IST
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