AI valuation correction could attract investment, says RBI governor

Reserve Bank of India (RBI) Governor Sanjay Malhotra stated that if a valuation correction occurs in artificial intelligence (AI)-related stocks across advanced economies, it could trigger a positive shift in global capital inflows toward India.

Key Context & Highlights

• Global Capital Reallocation: A significant share of global investor capital in recent years has concentrated in mega-cap technology and AI-linked equities in developed markets, notably the United States. A market correction or moderation in lofty AI multiples could prompt institutional investors to diversify into emerging markets with resilient macroeconomic fundamentals, with India positioned as a primary beneficiary.
• Domestic Financial Resilience: Malhotra pointed to the strong balance sheets of Indian banks and non-banking financial companies (NBFCs), noting that domestic capital adequacy ratios remain well above regulatory minimums (NBFCs averaging over 25% against the 15% threshold) and provide a buffer against external shocks.
• Risk Management & Cyber Preparedness: While highlighting potential upside for investment, the RBI Governor reiterated that the central bank remains vigilant regarding AI-related operational risks, cybersecurity, and financial interconnectedness, having issued guidance and capacity-building frameworks for regulated entities.
• Caution on Complacency: Despite the Indian financial system’s current strength, Malhotra cautioned that “today’s resilience may not necessarily imply tomorrow’s immunity,” emphasizing continuous monitoring of global volatility, geopolitical frictions, and emerging technological dependencies.