India Well Placed to Withstand Global AI Risks, Says RBI Governor

Speaking at the Kautilya Economic Conclave 2026, Malhotra said the rapid expansion of AI investment had become an important driver of global financial markets. A slowdown in investment or weaker earnings expectations in the sector, however, could trigger a significant repricing of AI-linked financial assets, particularly in advanced economies.

While such a correction could create broader risks for international markets, Malhotra said India could potentially benefit if global capital were redirected towards domestic markets.

He noted that Indian equity markets had already experienced an adjustment from previously elevated valuations in recent months, describing the correction as orderly.

Malhotra identified excessive valuations linked to AI as one of five major risks currently facing the global financial system. Other concerns highlighted by the RBI Governor included high levels of global debt, leverage within the non-bank financial sector, rising exposure to private credit and increasing cybersecurity threats.

At the same time, he said these vulnerabilities did not currently point to an imminent episode of financial stress, while stressing the need for continued vigilance.

Malhotra said India was dealing with an uncertain global environment from a position supported by relatively strong macroeconomic fundamentals. He also pointed to the resilience of balance sheets across banks and non-bank financial institutions as an important buffer against external shocks.

The RBI Governor acknowledged that India remains exposed to developments in global commodity prices, international financial conditions and changes in capital flows. However, he said the country's financial system had continued to demonstrate resilience despite these external risks.

He said strong macroeconomic fundamentals and the resilience of the domestic financial system provided confidence in India's ability to absorb persistent global shocks.

Among the risks facing the financial system, Malhotra identified cybersecurity as the most immediate concern, underscoring the need for greater attention to threats arising from the increasingly digital nature of financial activity.