Reserve Bank of India Governor Sanjay Malhotra warned on October 3 that a correction in elevated AI valuations could trigger global financial volatility. Speaking at the Kautilya Economic Conclave in New Delhi, he noted that any slowdown in artificial intelligence investment or corporate earnings could cause a sharp repricing of global financial assets. However, he emphasized that a valuation adjustment in advanced economies might ultimately direct capital inflows toward India.
Governor lists AI asset repricing among top five global risks
Furthermore, Malhotra identified stretched AI valuations as one of five key threats facing international financial systems. He placed technology risks alongside high global debt, non-bank financial leverage, private credit vulnerabilities, and cyber threats.
Additionally, Indian equity markets have already experienced orderly corrections in recent months. Consequently, strong macroeconomic fundamentals position the domestic economy to absorb external financial shocks.
| Global Vulnerability Category | Risk Dynamics Identified by RBI |
| Artificial Intelligence Valuations | Market corrections, declining free cash flows, and sudden asset repricing |
| Cyber and Technological Threats | Cross-border contagion arising from national cybersecurity capability gaps |
| Sovereign Debt & Leverage | Hardening bond yields, shortened maturities, and high non-bank leverage |
| Private Sector Credit | Weakening underwriting standards and high-profile borrower defaults |
Non-banking shocks and cyber threats pose future crisis risks
Therefore, Malhotra stated that the next financial crisis might originate outside traditional banking sectors. He warned that geopolitical events, severe cyberattacks, or technical failures could trigger widespread economic disruption.
Meanwhile, he urged regulators to build resilient shock absorbers rather than attempting to eliminate all financial risks. Thus, maintaining operational resilience ensures sustained innovation without compromising broader stability across financial markets.
