Murmu outlines agile regulation for digital finance challenges
Shirish Chandra Murmu, Deputy Governor of the Reserve Bank of India, outlined the issues and opportunities for financial regulation in the digital era. He emphasized the need for agile supervision to address evolving risks and foster trust.
Navigating new risk landscapes
Digitalisation has compressed the time dimension in finance, demanding a shift from post-facto remediation to proactive detection and agile interventions.
The regulatory perimeter is blurring as financial activities unbundle across regulated and unregulated entities, leading to fragmented oversight and potential for regulatory arbitrage across jurisdictions.
New systemic risks arise from increased interconnectedness with technology providers, single points of failure, and the opacity of decentralised finance.
Operational resilience is challenged by rising cyberattacks and the rapid circulation of distorted information, which can influence market sentiment.
These shifts place sustained demands on regulatory capacity, requiring enhanced expertise within regulatory teams.
New tools for proactive supervision
Digitalisation offers regulators opportunities for proactive oversight through granular, high-frequency data, enabling early detection of stress and anomalous behavior.
It provides system-wide visibility to identify critical nodes and assess interconnected risks, anticipating disruptions even when individual entities appear resilient.
Regulators can achieve more adaptive calibration, operationalizing proportionality with greater precision through digital tools.
Furthermore, digitalisation helps reduce regulatory burden by enabling structured impact assessments and embedding digital processes within supervisory functions, exemplified by RBI's PRAVAAH and DAKSH platforms for regulatory services and compliance monitoring.
A necessary, complex evolution
The speech clearly articulates the dual nature of digital transformation for financial regulation.
While the challenges are profound, the opportunities for more effective and adaptive oversight are equally compelling.
Murmu's emphasis on agility, systemic visibility, and enhanced regulatory capabilities underscores a pragmatic approach to securing financial stability in a rapidly evolving landscape.