michael debabrata patra : harnessing digital technologies in central banks - opportunities and challenges keynote address by dr michael debabrata patra, deputy governor of the reserve bank of india, at the saarcfinance seminar on emerging digital technologies in central banking and finance, goa, 17 january 2024. * * * introduction good morning and a warm welcome to all colleagues from central banks representing the south asian association for regional cooperation ( saarc ). we are also delighted to be joined by experts on emerging technologies from the academia, the private sector, the legal sphere, data scientists, the world bank, the rbi innovation hub and of course, my colleagues from the reserve bank of india ( rbi ). this two - day seminar with'emerging digital technologies in central banking and finance'as its theme marks the fulfilment of the commitment made in the 44th meeting of the saarcfinance governors'group held at marrakech in october 2023. given recent developments on the technological front globally, the seminar's theme could not have been timelier and more relevant. we hope that it will serve as an avenue for intensifying engagements within the saarc through sharing of knowledge and experiences as well as by energising person - to - person interactions. the state of play new age technologies such as application programming interfaces ( apis ), artificial intelligence ( ai ) and machine learning ( ml ), biometric - based identification and authentication ( biometrics ), cloud computing ( cc ) and distributed ledger technology ( dlt ) are currently powering innovations in the financial sector worldwide. technological advances are also making the role of central banks more relevant and multi - faceted. leveraging on these technologies, central banks are re - engineering their own work processes and procedures, building new capacities and, more generally, rethinking their approach to their various functions. they are also adapting their operations to new demands of citizens for more speed, convenience, and affordability. at the same time, central banks are widening and deepening their oversight and regulation role to deal with new products and new providers, including those like fintech and bigtech that operate outside the purview of the traditional financial sector. consequently, central banks are also confronted with the associated risks. in doing so, they must pay heed to the fact that regulations can stifle or foster innovation in the financial sector by the manner in which they shape the rules and

standards for cooperation, interoperability and competition. it is in this context that central banks cannot and should not work in isolation1. more than ever, cooperation and dialogue with other central banks and regulators as also with other stakeholders, both domestic and international, is an imperative if they have to navigate the unresting tides of innovation. hence, forums like this seminar assume importance. 1 / 6 bis - central bankers'speeches opportunities let me spend a few minutes discussing the opportunities presented by these emerging technologies. first, we live in an age of data – driven policy making. central banks are repositories of enormous volumes of data. therefore, data quality and data governance are of utmost importance to ensure that policy measures are apposite and effective. in this context, digital technologies, especially the newer ones including ai and ml, help to dive deep into existing data as well as unstructured and high - frequency information to carry out meaningful analyses. they help to detect trends and anomalies better and thereby provide useful insights on specific economic and financial situations as inputs for policy formulation. in essence, the synergy between structured data, rigorous reporting and ai amplifies the productivity of data - driven processes, reinforcing their importance in modern central banking. second, central banks can use digital technologies, especially newly developed tools of big data analytics, for economic forecasting that is vital for forward - looking monetary policy assessments. an important development in this regard is the billion prices project ( bpp ) created at mit in 2008, which experiments with retail prices that are posted online on the websites of retailers all over the world. the objective is to improve the computation of traditional economic indicators starting with the consumer price index 2. by 2010, the project was collecting 5 million prices every day from over 300 retailers in 50 countries. in may 2017, the bpp began experimenting with crowd - sourcing and mobile technologies to measure the monthly inflation rate in venezuela where official statistics haven't been published since 2015. third, in the oversight of financial markets, technological innovations can help trade repositories ( trs ) to tackle data quality issues and increase the value of tr data to authorities and the public. regulators need to be vigilant, however, about unexpected forms of interconnectedness between financial markets and institutions on account of applications of ai and ml. fourth, regulatory compliance is another area which can significantly benefit central banks through regtech and suptech tools. with the increasing complexity of financial regulations