World Bank Report on India's Financial Sector
India must intensify financial sector reforms and stimulate private capital mobilization to achieve its goal of becoming a USD 30-trillion economy by 2047, as per the World Bank's Financial Sector Assessment (FSA) report.
Key Highlights
- The report praises India's digital public infrastructure and government programs for significantly enhancing access to financial services for both men and women.
- Recommendations include increasing account usage, especially among women, and facilitating access to diverse financial products for individuals and MSMEs.
Financial Sector Assessment Program (FSAP)
- FSAP is a joint initiative by the IMF and the World Bank that provides a comprehensive analysis of a country's financial sector.
- Mandatory for jurisdictions with systemically important financial sectors, conducted every five or ten years depending on the jurisdiction.
- The last FSAP for India was conducted in 2017, with the FSSA and FSA reports published in December 2017.
Financial Reforms and Resilience
The report notes that India's financial system has become more resilient, diversified, and inclusive since the last FSAP in 2017, aided by financial sector reforms that helped the country recover from economic distress and the pandemic.
Regulatory and Supervisory Measures
- Expansion of regulatory authority on cooperative banks and tightening of prudential rules.
- Welcomes the scale-based regulation for NBFCs, urging further strengthening of the credit risk management framework for better supervision.
Capital Market Developments
- Capital markets have grown from 144% to about 175% of GDP since the last FSAP.
- The report suggests developing credit enhancement mechanisms, risk-sharing facilities, and securitization platforms to further mobilize capital.