RBI Chief Warns Next Financial Crisis Could Start with a Cyberattack
Sanjay Malhotra, governor of the Reserve Bank of India, has warned that the next financial crisis may not originate from a bank, but from a geopolitical event, a cyberattack, or a technological failure. He made these remarks at the Kautilya Economic Conclave in New Delhi on Saturday, as reported by Bloomberg.
AI, in particular, has exacerbated cyber risks and introduces new challenges, Malhotra noted. These include risks from faulty models, reliance on external suppliers, and reduced human oversight. He also flagged the potential for sharp falls in asset prices due to a slowdown in AI spending or earnings.
This concern is not unique to India; in August, the Financial Stability Board identified AI-driven cyberattacks as the top risk to the global financial system. Similarly, ECB chief Christine Lagarde cautioned that AI could trigger financial crises.
Malhotra emphasized the current health of India's banks but cautioned against complacency, stating, "Today’s resilience may not necessarily imply tomorrow’s immunity."
The war in Iran has pushed up commodity prices for India, yet the economy grew 7.8% in Q1-Q2 2023, according to Bloomberg. The RBI will announce its next rate decision on Wednesday, with most economists expecting its first rate hike since early 2023 due to rising inflation.