WB asks India to provide further impetus to financial sector reforms to achieve 2027 vision

The World Bank in its latest Financial Sector Assessment (FSA) report hasstated that India achieving its vision to become a $30 trillion economy by 2047 would require further impetus to the financial sector reforms to boost private capital mobilization.

The FSA report highlighted that India’s financial system has become more resilient, diversified, and inclusive since the last Financial Sector Assessment Program (FSAP), a joint program of the International Monetary Fund (IMF) and WB was published in 2017.

“The report acknowledges that financial sector reforms helped India recover from various distress episodes of 2010s as well as the pandemic. On regulation and supervision of banks and NBFCs, WB acknowledged India’s expansion of regulatory authority on cooperative banks, tightening of key prudential rules, and reorganization of regulatory and supervisory departments to enhance effectiveness,” the Department of Economic Affairs, Ministry of Finance (MoF), Government of India said in a press release issued through the Reserve Bank on Friday,

It said the WB welcomed the scale-based regulation for NBFCs which recognises the different needs of this diverse industry. WB has recommended further-strengthening of the credit risk management framework for better supervision of banks and NBFCs, it added.

“WB acknowledges that oversight in securities markets has been sound, backed by reforms, including enhancing collateral management and business continuity for investors, framework for sustainable investments, mutual fund liquidity requirements, and the Corporate Debt Market Development Fund (CDMDF),” the release said.

However, WB has indicated a way forward for better oversight through development of integrated approach to monitoring conduct risks (especially for mutual funds) and strengthening standards of self-regulatory organizations, it added.

For India’s capital markets, WB has noted that the Capital markets (equity, government bonds and corporate bonds) have increased from 144 percent to about 175 percent of GDP since the last FSAP.

These gains have been supported by a robust capital market infrastructure and diverse investor base. “The report suggests developing credit enhancement mechanisms, risk sharing facilities, and securitization platforms to further mobilize capital,” it added.