Governor, Reserve Bank of India
LIVE RBI Guv Shaktikanta Das Keynote Address At High-Level Conference 'Central Banking At Crossroads
Keynote Address by Governor Shri Shaktikanta Das at the High-Level Conference "Central Banking at Crossroads," a part of RBI@90 initiative, at New Delhi
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About Shaktikanta Das
Shaktikanta Das, Principal Secretary to Prime Minister Narendra Modi and former Governor of the Reserve Bank of India, delivered several addresses in April 2026 focused on India’s economic resilience and reform agenda. Speaking at the CII Annual Business Summit 2026 and the All India Management Association’s National Leadership Conclave, Das described India’s navigation of recent global crises as akin to a "chakravyuh," where the challenge lies not in entering a crisis but in exiting it without creating new imbalances. He attributed India’s average annual GDP growth of 7.8% between 2021-22 and 2025-26 to targeted fiscal and monetary stimulus that was gradually withdrawn, structural reforms such as the goods and services tax and the insolvency and bankruptcy code, and a policy of strategic self-reliance (Atmanirbharta). Das also highlighted government initiatives including a ₹7,280 crore rare earth permanent magnet manufacturing scheme and a national critical mineral mission, and stated that inflation control benefits the poor by increasing real spending power. Das rejected the narrative that the Reserve Bank’s monetary policy had caused a growth slowdown, citing 7.1% GDP growth in 2024-25 as evidence. He emphasized that India’s growth is anchored in macroeconomic stability, contained inflation, fiscal consolidation, and a resilient financial system, and said there is "no reform complacency" in the government’s pursuit of its Viksit Bharat 2047 vision. At the AIMA conclave, he received a public service excellence award and remarked that resilience maximization is replacing cost minimization as a global priority.
Transcript (9 segments)
✨ AI-enhanced transcript with speaker attribution
S
Shaktikanta Das0:00
Low for longer interest rates. This was an uncharacteristic departure from the monetary mysticism that had prevailed up to the 1990s. Clearly, central banking has evolved in line with the developments of the 21st century. While the pandemic-time measures provided the much-needed support to the economies, in the aftermath of the pandemic, the limits and downsides of easy monetary policy in protecting economic activity in a crisis period became more evident. Today, rightly or wrongly, the central banks are accused of the distributional consequences of their actions. The negative equity that weighs in the balance sheets of certain central banks is seen as compromising their independence in the conduct of monetary policy. The story in India was, however, different, as most of our liquidity measures were calibrated and carried end dates at the time of their announcement itself.
Another challenge staring at central banks today emanates from soaring public debt, caused in a considerable measure by the pandemic-related fiscal stimuli and the subsequent efforts for fiscal consolidation not gaining adequate traction. Such a situation is becoming a binding constraint on monetary policy in several countries. Global public debt has surged post the pandemic to 93.2% of world GDP in 2023 and is likely to increase to 100% of GDP by 2029. These are the estimates of the IMF Fiscal Monitor which was released in April 2024. In major economies, debt-to-GDP ratios are on an upward trajectory, raising concerns about their sustainability and their negative spillovers for the broader global economy. In several other countries, central banks are willingly expected to facilitate financing of such huge public debts. In fact, the debt overhang is simmering underneath the radar of central banks, threatening to unanchor inflation expectations and undermine macroeconomic stability.
For emerging market central banks, the international dimensions of monetary policy continue to be a testing challenge for them. The trilemma is real. Today, the global economy is more financially integrated than ever before. Monetary policy actions in systemic economies produce large fluctuations in capital flows and exchange rates, which can then feed into the domestic liquidity, inflation, and eventually affect the real economy. While monetary policies in systemic economies are determined by their domestic inflation-growth considerations, they have large spillovers to the emerging and developing economies and even to some of the other advanced economies. These spillovers can be expected to accentuate as capital flows dwarf trade flows. Quite naturally, emerging economies are having to strengthen their policy frameworks and buffers to manage this external flux and mitigate its adverse consequences.
Let me now turn to financial stability. Financial stability is, in fact, the essential reason why central banks exist. Price stability as a central bank objective is more of a recent vintage. There is growing opinion today that low-for-long policies practiced during the GFC and again during the pandemic, apart from providing support to the real economy, also produced exuberant financial asset prices that have come back to haunt central banks in their role as guardians of financial stability. Amidst ultra-low interest rates and super-abundant liquidity, leveraging and risk-taking were celebrated as if there is no tomorrow. Consequently, when central banks were confronted with inflation surges in 2022 in the shadow of the war in Ukraine, they reacted with one of the most aggressive and synchronized tightening of monetary policies in history. This resulted in risks to financial stability, especially when these risks morphed into a banking crisis in certain countries in March 2023 and sell-offs in financial markets in August and September this year, that is, August and September 2024. These developments have once again brought to the fore the role of central banks in securing and preserving financial stability. Specifically, how should they account for financial stability considerations in their pursuit of price stability is a big question that merits an answer.
Let me now address some of the emerging risks to financial stability. I have selected three points which I would like to highlight. First, the divergence in global monetary policies—that is, monetary easing in some economies, tightening in a few, and pause in several other economies—can be expected to lead to volatility in capital flows and exchange rates, which may disrupt financial stability. We saw a glimpse of this with the sharp appreciation of the Japanese yen in early August this year, which led to disruptive reversals of the yen carry trade and rattled financial markets across the globe. Second, private credit markets have expanded rapidly with limited regulation. They pose significant risks to financial stability, particularly since they have not been stress-tested in a downturn. Third, higher interest rates aimed at curtailing inflationary pressures have led to an increase in debt servicing costs, financial market volatility, and risks to asset quality. Stressed asset valuations in some jurisdictions could trigger contagion across financial markets, creating further instability. The correction in commercial real estate prices in some jurisdictions can put small and mid-sized banks under stress, given their large exposures to the commercial real estate sector. The interconnectedness between commercial real estate and the non-banking financial institutions, and the broader banking system, amplifies these risks.
I would now like to turn to new technologies. In recent years, the technology-driven digitalization wave in the payment sphere has been revolutionary. While most of the innovations have been at the national level focusing on retail payments, the market for cross-border payments has also expanded substantially. The significant volume of cross-border worker remittances, the growing size of gross flows of capital, and the increasing importance of cross-border e-commerce have acted as catalysts to this growth. Remittances are the starting point for many emerging and developing economies, including India, to explore cross-border peer-to-peer, that is, P2P payments. We believe there is immense scope to significantly reduce the cost and time for such remittances. India is one of the few large economies with a 24x7 real-time gross settlement system, that is, RTGS system. The feasibility of expanding RTGS to settle transactions in major trade currencies such as the US dollar, the euro, and the Great Britain pound can be explored through bilateral or multilateral arrangements. India and a few other economies have already commenced efforts to expand linkage of cross-border fast payment systems, both in the bilateral and in the multilateral modes.
India has developed a world-class digital public infrastructure which has facilitated the development of high-quality digital financial products with enormous potential for cross-border payments. India is now home to the world's third most vibrant startup ecosystem, with 14,000 recognized startups, more than 100 unicorns, and over 150 billion US dollars in funding raised. India's experience in digital public infrastructure can be leveraged by other countries to improve and usher in a global digital revolution. Central Bank Digital Currencies is another area which has the potential to facilitate efficient cross-border payments. India is again one of the few countries that have launched both wholesale and retail Central Bank Digital Currencies, that is, CBDCs. Programmability, interoperability with UPI retail fast payment system, and development of offline solutions are some of the value-added services which we are now experimenting as part of our CBDC pilot. Going forward, harmonization of standards and interoperability would be important for CBDCs to be used for cross-border payments and to overcome the serious financial stability concerns associated with cryptocurrencies. A key challenge could be the fact that countries may prefer to design their own systems as per their domestic considerations. I feel we can overcome this challenge by developing a plug-and-play system that allows replicability of India's experience while also maintaining the sovereignty of respective countries.
It is well recognized that growing digitalization of financial services has enhanced the efficiency of the financial sector across the globe. At the same time, it has brought in several challenges which central banks have to deal with. For instance, in the modern world with deep social media presence and vast access to online banking, with money transfer happening in seconds, rumors and misinformation can spread very quickly and can cause liquidity stress. Banks have to remain alert in the social media space and also strengthen their liquidity buffers. Latest technological advancements such as artificial intelligence and machine learning have opened new avenues of business and profit expansion for financial institutions. At the same time, these technologies also pose financial stability risks. The heavy reliance on AI can lead to concentration risks, especially when a small number of technology providers dominate the market. This could amplify systemic risks as failures or disruptions in these systems may cascade across the entire financial sector. Moreover, the growing use of AI introduces new vulnerabilities such as increased susceptibility to cyber attacks and data breaches. Additionally, AI's opacity makes it difficult to audit or interpret the algorithms which drive the decisions. This could potentially lead to unpredictable consequences in the markets. Banks and other financial institutions must therefore put in place adequate risk mitigation measures against all these risks. In the ultimate analysis, banks have to ride on the advantages of the AI and big tech, and not allow the latter, that is, not allow AI and big tech to ride on them.
Let me now try and conclude. Despite the difficult trials and trade-offs, central banking in the current decade is a success story. In the realm of monetary policy, central banks have been successful in bringing inflation closer to targets. Major financial collapses or recessions, which were seen during earlier episodes of crisis, have been averted. Central banks are now at the forefront of technological innovations and are driving them through sandboxes, innovation hubs, and hackathons. As we navigate the high-intensity tail events and black swan events of the current decade, the lessons learnt can well form the basis of our deliberations today to chart out a course for the future. Central banks must remain vigilant, adaptable, continuously assess risks, and build resilience. They should remain prepared to navigate complex challenges, support sustainable growth, maintain price stability, and promote sound and vibrant financial systems. Thank you. Thank you very much.