Digitalisation creating new categories of risk and reshaping familiar risks in unfamiliar ways: Shirish Chandra Murmu

Digital innovations such as cloud computing and decentralized finance introduce new systemic risks, warned RBI Deputy Governor Shirish Chandra Murmu. These risks stem from heightened connectivity with unregulated technology providers, single failure points, complex operational structures, and unclear accountability frameworks.

“Systemic vulnerabilities can emerge even when individual entities appear stable,” Murmu stated during his keynote at the 3rd Annual Global Conference of the College of Supervisors. “Regulators must therefore assess system-wide impacts including market concentration, lack of viable alternatives, and disruption risks affecting widely-used services.”

The deputy governor acknowledged digitalization’s benefits—including operational efficiency, market transparency, service accessibility, and competitive advantages—while cautioning about its risk transformation effects. “Digital evolution is reshaping traditional risks through altered transmission channels, reduced detectability, and modified controllability,” he noted.

“Financial activities now operate at unprecedented speeds,” Murmu emphasized. “Instant settlement protocols, continuous service operations, and algorithmic decision-making have dramatically compressed risk escalation timelines. Operational failures, fraudulent activities, or confidence crises can now achieve systemic scale before traditional monitoring systems register anomalies.”

This acceleration necessitates regulatory modernization, shifting from retrospective reviews toward real-time monitoring and adaptive interventions while maintaining prudent oversight standards. Murmu highlighted the challenge of balancing regulatory stability with responsiveness: “Proliferating financial technologies create tension between regulatory certainty and timely adaptation. Excessive rule modifications breed compliance fatigue, while delayed responses risk material oversight gaps.”

The decentralization of financial services further complicates regulation, Murmu observed: “Traditional finance is being disaggregated across hybrid ecosystems involving both regulated institutions and unsupervised technology platforms. Current regulatory frameworks struggle with this distributed model, as oversight responsibilities remain fragmented across multiple agencies lacking unified visibility into end-to-end risk pathways.”

Murmu concluded by stressing the critical intersection of regulation and innovation: “Digital dynamics have fundamentally altered the cause-effect relationships in finance. Effective regulation must anchor itself in empirical evidence while maintaining forward-looking adaptability—serving as both stability mechanism and innovation catalyst to sustain enduring trust in financial systems.”

Published on January 13, 2026