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The Reserve Bank of India (RBI) believes that technology-induced systemic risk has become one of the key areas of concern for the financial sector and requires close attention. “It may indeed be one of the only few truly global risks that threaten the entire financial system across the world, as digital and online technology blur the boundaries between nations, industries and make the world into one entity,” Shri Swaminathan J, deputy governor of RBI said in his speech at an event. “This growing web of interdependencies means that a disruption in one area can rapidly propagate through the system, affecting numerous entities and jurisdictions simultaneously. Therefore, understanding the full scope of these interconnections has become essential for managing systemic risk,” Swaminathan J pointed out. “As the intensity and frequency of such events—such as cyberattacks or critical vendor disruptions—continue to rise, the importance of forward-looking risk management, adequate policy intervention and backup plans cannot be overstated,” he added. Swaminathan J was speaking at the International Conference of the International Association of Deposit Insurers – Asia Pacific Regional Committee (IADI-APRC), hosted by the Deposit Insurance Credit Guarantee Corporation (DICGC). The primary function of deposit insurance is to stabilize the financial system in case of bank failures by assuring depositors they will have immediate access to their insured funds even if their bank fails. Deposit insurers, as vital pillars of the financial safety-net system, play a crucial role in bolstering public confidence in the banking sector and fostering overall financial stability. With the growing adoption of emerging technologies, a significant portion of banking transactions and services are conducted through digital channels in India. The expansion and widespread adoption of digital payment systems has enabled rapid, low-cost transactions and easy withdrawals using online banking and mobile apps. However, this shift increases the risk to…

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Filed under: News - @ August 20, 2024 5:24 am