Page 52 - Banking Finance February 2026

ARTICLE

2. Medium-Level Risks Dominate 3. Cyber Threats
No risk category was assessed as "high." Instead, risks The rapid growth of digital banking and payments has
were perceived as medium in intensity, showing bal- increased efficiency but also created vulnerabilities. Re-
anced optimism tempered with awareness of poten- spondents highlighted the rising risk of cyberattacks,
tial vulnerabilities. This moderation in risk perception system outages, and data theft. The RBI has already
demonstrates confidence yet caution in light of evolv- strengthened cyber resilience frameworks, but survey
ing global and domestic conditions. participants remain alert to the potential for large-
scale disruptions from cyber risks.
3. Top Risk Factors Identified
Respondents identified the following as the top sys- 4. Asset Price Correction
temic risks: Equity and real estate markets have seen sustained
i. Global Spillovers: Rising geopolitical tensions, glo- growth, raising concerns of overvaluation. Respondents
bal growth slowdown, and financial tightening by worry that sharp corrections could affect investor con-
major economies remain significant concerns. fidence and lead to broader market stress. While credit
exposure to these sectors remains contained, systemic
ii. Capital Flow Volatility: Sudden inflows or outflows
risks cannot be fully ruled out.
of foreign investment can impact currency stabil-
ity, bond markets, and reserves.
Other Emerging Risks
iii. Cyber Threats: Increasing digitisation of banking In addition to the four primary risks, respondents also
services heightens the risk of cyberattacks, data
pointed to a set of emerging concerns. Domestic macro-
breaches, and IT disruptions. economic shocks remain a possibility, particularly in the
iv. Asset Price Correction: Elevated valuations in eq- event of unexpected inflationary swings or fiscal imbal-
uities and real estate may correct sharply, leading ances. Some participants also highlighted institutional vul-
to market stress. nerabilities, such as governance lapses or potential stress
in segments like NBFCs and cooperative banks, which could
Detailed Analysis of Identified Risks undermine confidence.

1. Global Spillovers Furthermore, climate-related risks are increasingly
India is deeply integrated with the global economy recognised as a long-term challenge, with the potential to
through trade, capital flows, and financial markets. influence asset quality and credit exposures across sectors.
Geopolitical conflicts, shifts in global monetary policies, These risks, while currently assessed as moderate, under-
or supply-chain disruptions can spill over to India's fi- line the need for continuous vigilance and adaptive regula-
nancial system. Respondents flagged such external tory responses.
headwinds as persistent risks. While India's macroeco-
nomic resilience has improved, it cannot remain fully
insulated from global shocks.

2. Capital Flow Volatility
The survey participants expressed concern over the pos-
sibility of volatile capital flows, especially in response
to changes in US interest rates, currency pressures, or
risk-aversion episodes. While foreign exchange reserves
provide a buffer, sudden capital outflows may affect
asset prices and exchange rates. However, the success-
ful inclusion of Indian government bonds in global indi-
ces is expected to enhance inflows and mitigate risk
over time.

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