need to assess risk in banks ’ business models and have a reasonably accurate assessment of the balance between the risk taking capacity of a financial institution and the appropriate level of capital available to absorb unexpected losses and intervene early when there is an imbalance. inadequate assessments and imbalances as also delays and unpreparedness for timely and decisive interventions can make the financial system highly vulnerable leading to potential loss of confidence. 45. on the other hand, excessive capital requirements could drive risk to less regulated entities which may pose potentially new risks to the system. the crisis revealed, blind spots in supervisor ’ s assessment of bank risks, as under highly stressed and largely unforeseen circumstances, they were found to be inadequately capitalized. the timely and accurate supervisory assessment of capital levels is critical. given the systemic impact of sifi failures, there is also the need for continuous and intense supervision of sifis. supervisors need to bis central bankers ’ speeches have a through the cycle mentality as times of economic serenity breeds complacence. supervisors need to stay hungry and not necessarily foolish. 46. supervisors also need to have a result oriented approach, focussing on outcome of stress tests and risk management processes within banks. they need to review whether they are commensurate with their assessment of the bank ’ s risk profile. the lessons from the financial crisis showed that considerable supervisory attention was focussed on the governance frameworks and processes in areas such as risk management, credit risk approvals, board oversight, and capital adequacy assessments, without enough analysis to confirm that the outputs of the processes, given the business model of the bank and its products in terms of the risk profile and exposures were consistent with supervisory expectations. the crisis underscored flaws in bank ’ s risk management practices and insufficient understanding by supervisors of the risks posed by increasing complexity of products and systems in banks. 47. the use of stress tests tools and its outcomes in understanding areas of risk and remedial action has emerged vital to the re - engineering processes in supervision. data integrity and aggregation are key to effective risk management for banks and critical for ongoing supervision of sifis, as is consolidated supervision. there is also a need for wider customer education, and stringent customer suitability and appropriateness policies in place while selling structured products. this underscores the importance of a strong governance framework and compliance culture in banks. stress testing also forms a critical part of the banks ’ internal capital adequa

unlocking new growth frontiers in the digital age 1 i. introduction this year ’ s nobel prize in physics celebrated the role of artificial intelligence ( ai ) in revolutionising the way we work and live. it is widely believed that ai and robotics will usher in a new wave of secular innovation, much like past breakthroughs in steam power and personal computers. 2 silently, new technologies are offering a way out of the cross currents of diverging macroeconomic and policy pathways, geopolitical tensions, geoeconomic fragmentation and climate change in which the global economy is transfixed. accordingly, these technologies are heralding a brighter future, arguably holding the key for many emerging and developing economies to escape the middle - income trap. 3 it is estimated that generative ai itself could increase global gdp by $ 7 - 10 trillion over the next three years. 4 large language models are estimated to increase the productivity levels of workers by 8 to 36 per cent. 5 inaugural address delivered by michael debabrata patra, deputy governor, reserve bank of india ( rbi ) at the depr conference on ‘ digital technology, productivity and economic growth in india ’ on november 13, 2024 at jaipur. valuable comments received from sakshi awasthy, sreerupa sengupta, ashish khobragade, himani sekhar, akshara awasthi, swastik yadav, rajib das and editorial help from vineet kumar srivastava are gratefully acknowledged. brynjolfsson, e., and mcafee, a. ( 2014 ). the second machine age : work, progress, and prosperity in a time of brilliant technologies. ww norton & company ; haldane, a. ( 2017 ). productivity puzzles. speech at the london school of economics. world bank. ( 2024 ). the middle - income trap. world development report. jp morgan. ( 2024 ). is generative ai a game changer? kalyani and hogan. ( 2024 ). ai and productivity growth : evidence from historical developments in other technologies. federal reserve bank of st. louis. over the past three decades, the digital revolution has been transforming the world, eclipsing all past revolutions. it is estimated that the global digital economy accounts for more than 15 per cent of global gdp 6. digital technologies are reshaping our lives through their impact on economic growth, employment, consumer welfare and living standards. these technologies are democratising