Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu said regulation in the digital era must strike an optimal balance between durability and responsiveness, while addressing the 3rd Annual Global Conference of the College of Supervisors on Friday.
He noted that new applications and business models are emerging with increasing frequency, posing challenges for regulators in terms of the appropriateness and speed of regulatory responses. “Frequent changes to regulations can create uncertainty and compliance fatigue, while delayed adaptation risks leaving material developments inadequately addressed,” he said.
Murmu observed that digitalisation is blurring traditional regulatory boundaries, with many financial activities being unbundled and delivered through non-financial platforms involving both regulated and unregulated entities. Such arrangements, he said, do not fit neatly within the RBI’s existing regulatory scope.
What did Shirish Chandra Murmu say ?
“Oversight of these activities is often fragmented among multiple financial and non-financial regulators, with no single authority having a comprehensive, end-to-end view of the entire activity chain and risk transmission pathways,” he said. As a result, regulatory actions taken within individual mandates may be sound in isolation but may not collectively address cross-cutting risks effectively.
He added that a key challenge lies in ensuring that sector-specific regulatory frameworks remain coherent when digital financial activities are designed to cut across them. To address this, Murmu said the RBI has adopted a hybrid regulatory approach, combining activity-based measures—such as directions on credit and debit cards—with entity-based measures, including prudential norms, to strengthen the resilience of its oversight mechanisms.
Fragmentation across jurisdictions
Fragmentation across jurisdictions further complicates oversight of digital financial activities. Differences in legal frameworks, institutional mandates, and domestic policy priorities can lead to divergent regulatory approaches, creating scope for regulatory arbitrage and uneven risk management. This, he said, underscores the importance of effective cross-border cooperation.
Murmu also noted that while digital tools may pose regulatory challenges, they can also create opportunities by improving how risks are observed, assessed, and addressed. He emphasised that regulation must remain anchored in its core objectives of financial stability and customer protection.