swaminathan j : supervision amidst emerging risks opening remarks by mr swaminathan j, deputy governor of the reserve bank of india, at the " high - level policy conference of central banks in the global south ", organised by the reserve bank of india as a part of commemoration of its 90th year, mumbai, 22 november 2024. * * * esteemed delegates from across the world, respected governor, deputy governors and all my colleagues from the reserve bank of india, ladies and gentlemen. a very good afternoon to you all. it is indeed my honour to deliver the opening remarks before such a distinguished panel comprising dr. john mushayavanhu, governor, reserve bank of zimbabwe ; mr. s. s. mundra, former deputy governor, rbi ; mr. jay surti, division chief, financial supervision and regulation division, monetary and capital markets department, imf ; mr. krishna sastry pendyala, partner, cyber security, e & y and the moderator for the panel, mr. m. nagaraju, secretary, department of financial services, government of india. the supervision of banks and financial institutions, as we understand it today, is a relatively recent development - dating back around fifty years1. however, the concept of overseeing banks is embedded in the very foundations of central banking. from the early days, central banks have fulfilled their role as the lender of last resort, ensuring that financial institutions remained solvent and protected against systemic crises. indeed, supervision has been the keystone2 that has supported the integrity and stability of the financial system, by protecting depositors'interests, and thereby fostering trust in the banking sector. as the world rapidly evolves, so does the nature of risks confronting the financial sector. technological advancements have brought incredible efficiencies but also significant vulnerabilities, such as cybersecurity threats and risks stemming from third - party dependencies. climate change, once considered a distant concern, now poses immediate and material risks to institutions and economies alike. added to this are the complexities of geopolitical uncertainties, volatile markets, and shifting macroeconomic trends. thus, the task of supervision has become more dynamic and critical than ever before. supervision, therefore, needs to evolve with the times and can no longer be just about enforcing compliance. instead, it needs to anticipate risks, respond swiftly to both foreseeable and unforeseen risks and foster resilience in the financial system.

to make allowances for such circumstances ; otherwise they could have serious repercussions for the real economy. and our monetary policy framework provides scope for this. but no two situations are ever exactly the same. it is necessary to have a thorough analysis on which to base our standpoints and an explanation for our decisions. another reason to deviate from the policy rule is if inflation is judged to be influenced by temporary effects, i. e. effects that will diminish without any monetary policy intervention. that, for example, is why we often focus our discussion on und1x, the measure of underlying inflation that excludes the effects of indirect taxes and subsidies as well as interest rate changes. but it can also be a case of temporary supply shocks that are not expected to persist, such as the sharp rise in electricity prices at the turn of the year 2002 / 2003. for a number of years the confidence in monetary policy and economic policy in general has been high enough to allow such factors to be taken into account. but at the same time it places demands on our communication – that we are clear, for example, about when there is reason to extend the forecast horizon and why. it is also one of the reasons that we introduced some improvements to our decision - making material in our most recent inflation report, which we expect will help us explain and justify our actions more clearly. these included extending our forecast horizon somewhat in certain situations. so we do have room for a considerable measure of flexibility. and we have also made use of that over the years. on several occasions, e. g. 2001 and 2003 but also earlier, we made it clear that we had disregarded transitory effects that were affecting inflation. the riksbank has also referred to developments in asset prices, e. g. in 2000, but we did not believe at the time that it gave reason to allow policy to be affected to any great extent. recently, however, developments in property prices have had some, albeit limited, significance for our monetary policy decisions. the inflation target is thus our point of departure, and we normally apply a time horizon that reflects the lag with which monetary policy has an impact on inflation. but we are prepared to depart from this if we have good reason to. our ambition in such cases is to communicate the reasons clearly. why has inflation been so low? let me now go on to address the factors behind the current inflation rate. the gauge that the riksbank has chosen for