Will Deploy Appropriate Policy Measures Says RBI Gov

He warned that if the crisis persists longer, it may also translate into second order inflationary pressures.

Malhotra in his keynote address at the 25th FIMMDA-PDAI Annual Conference, in Amsterdam also flagged the rapid expansion of private credit markets and uncertainty around artificial intelligence as

emerging risks for the global financial system, while noting that India remains resilient amid a challenging global macroeconomic environment.

The other risks for the global economy and financial system were rising public debt, geo-economic fragmentation and stretched equity valuations.

He said at a time when the global financial system is navigating through a period of elevated uncertainty and challenges, these have implications not just for the real sector but also for the financial markets.

“Geo-economic fragmentation caused by tariffs, trade restrictions, and industrial policies are reshaping not only global supply chains, they are also affecting the free movement of capital and led to fragmentation of financial flows.

High levels of public debt in several major economies is another concern. Their continued fiscal expansion has made it difficult for them to return to the path of

fiscal consolidation that was expected post the pandemic related stimulus,” said Malhotra.

On the other hand, geopolitical pressures are compelling a significant rise in defence spending – a shift that could pose major challenges for fiscal sustainability. Stretched valuations in certain asset

classes, particularly equities including a few tech stocks, could also have implications across markets and geographies he said.

He also called on Indian banks to evolve as market-makers globally if the global rupee market has to be on-shored.

Indian banks are dealing only with offshore market-makers rather than with end-users.

The RBI chief also said, “We will also stand prepared to deploy appropriate policy measures, as warranted, to mitigate spillovers and ensure orderly market conditions.”

His comments come at a time when the rupee breaching the 95 to the dollar mark in intraday on Thursday for the first time since March 30, 2026, and closed at an all-time low of 94.91 per US dollar.