The Reserve Bank of India (RBI) highlighted both the benefits and challenges of digitalisation in its Report on Currency and Finance (RCF) for 2023-24, released on Monday. While digitalisation has significantly enhanced accessibility and convenience in financial services, it also presents several risks that could impact monetary policy and financial stability.
The report emphasizes that digitalisation has reshaped consumer and financial intermediary behaviour, leading to potential risks such as impulsive spending, herd behaviour, and data breaches. Digital platforms facilitate rapid dissemination of financial trends and information, which can lead to herd behaviour where individuals follow the crowd during market frenzies or bank runs. This behaviour can disrupt financial stability, as seen when depositors might withdraw their funds from banks in response to mass movements.
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