As scams arise and a global shock kicks in, RBI should be prepared to have its regulatory resolve tested

The US-Israel attack on Iran has profound implications for the long-term stability of the West Asian region, global geopolitics, energy security and global economics. The expanding nature of the conflict is spawning a long list of collateral damages, amplifying vulnerabilities wherever they exist.

While almost all the negative financial impact seems to be already out in the open, it is worth asking whether there are any hidden dangers lurking in plain sight, invisible to the untrained eye.The impact on markets has been somewhat predictable so far. The two leading benchmarks in global energy markets have raced along the expected trajectory.

In the domestic market, benchmark stock indices have dropped close to 12% from the eve of the attacks till 31 March. The rupee has depreciated by over 4% during the same period.

Away from this spectrum of anticipated outcomes, it might be time to focus on the financial sector’s unanticipated speed-breakers, especially because regulatory challenges are known to peak during and after crises. The Reserve Bank of India (RBI) is already faced with four distinct challenges.The first relates to conduct of monetary policy.

RBI’s monetary policy committee is scheduled to start the 2026-27 round of policy meetings on 6 April and will have to immediately reckon with a challenging combination of slowing growth with higher inflationary impulses. Whatever the six wise committee members decide to do—or not do—with interest rates, RBI will have to come up with a suitable liquidity strategy to supplement the panel’s rate call.Three other distinct regulatory challenges seem to be emerging already.The first is a collapse of the private credit market, a phenomenon that is already haunting financial