Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu Tuesday, highlighted the rapid transformation of the financial ecosystem driven by digitalisation, and said regulators must adopt agile, forward-looking, and risk-based approaches to safeguard financial stability while enabling innovation.
Delivering a special address at the 3rd Annual Global Conference of the College of Supervisors in Mumbai, Murmu noted that while digitalisation has improved efficiency, transparency, competition, and access to financial services, it has also introduced new and complex risks that can spread rapidly across interconnected systems.
He cautioned that machine-speed transactions, automated decision-making, and always-on digital services have compressed response times for regulators, increasing the potential for operational failures, cyber incidents, fraud, and sudden loss of confidence.
According to him, traditional regulatory frameworks built around periodic reporting and post-facto action must evolve towards proactive detection and timely intervention without compromising regulatory judgment.
The RBI DG pointed out that digital finance has blurred regulatory boundaries, with financial services increasingly being delivered through non-financial platforms involving both regulated and unregulated entities.
This fragmentation, he said, often leaves no single authority with a complete view of risks across the activity chain, increasing the scope for regulatory arbitrage domestically and across borders.
On the nature of regulation, the Deputy Governor observed that overly prescriptive rules risk becoming obsolete as technology evolves, while purely principle-based regulation can lead to uneven application if governance is weak. He advocated a balanced approach combining clarity with flexibility, supported by strong supervision and enforcement.
Addressing financial stability concerns, Murmu flagged emerging systemic risks from increased reliance on cloud services, algorithms, and third-party technology providers.
He stressed that accountability for technological outcomes must remain firmly with regulated entities, even when operations are outsourced or automated.
He also highlighted cyber threats, data integrity issues, and the rapid spread of misinformation as growing challenges in the digital age, underscoring the need for strong operational resilience and clear regulatory communication to maintain public trust.
At the same time, the RBI DG said digitalisation offers regulators powerful tools to enhance supervision.
He cited RBI initiatives such as MuleHunter.ai for detecting mule accounts, the PRAVAAH portal for digital regulatory services, and DAKSH, an end-to-end supervisory workflow system, as examples of how technology can improve risk monitoring while reducing compliance burden.