World Bank Urges India to Push Financial Reforms for $30T Vision

According​‍​‌‍​‍‌​‍​‌‍​‍‌ to the World Bank's Financial Sector Assessment (FSA) report, India has to fast-track reforms in the financial sector and also boost mobilization of private capital to achieve its goal of becoming a $30-trillion economy by 2047.

This report, part of the joint Financial Sector Assessment Program (FSAP) by the IMF and the World Bank, points out that India's financial system has become more resilient, diversified, and inclusive since the last review in 2017. It attributes the improvement in financial inclusion across the demographics, especially for women, to India's global-standard digital public infrastructure and a series of progressive government initiatives.

While acknowledging these achievements, the World Bank urged for more aggressive moves to increase account usage, provide easier access to a wider range of financial products for individuals and MSMEs, and invigorate private capital mobilization as a means of sustaining long-term economic growth.

Regarding regulation, the paper praised India for extending the oversight of cooperative banks, tightening prudential rules, and implementing scale-based regulation for NBFCs, yet it suggested India to get further credit risk management.by improving frameworks.

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The first paragraph of the report stated: "Moreover, the authorities are encouraged to accelerate the upgrade of credit risk management systems with a particular focus on the implementation of more prudent underwriting practices and strengthening the internal control and risk management processes in banks and NBFCs."

Moreover, capital markets in India have become quite extensive, with their total value going up from 144% to nearly 175% of GDP since the last FSAP, and this growth has been powered by a strong set of infrastructure and a wide range of investors.