India needs to boost financial reforms to become $30 trillion economy: World Bank report

In order to achieve India’s vision to become $30-trillion economy by 2047, the World Bank in its Financial Sector Assessment (FSA) report, has said that the country needs to give further impetus to financial sector reforms to boost private capital mobilisation.

The report has acknowledged that India's ' world-class' digital public infrastructure and government programmes have significantly improved access to a wider range of financial services for men and women. It has also made suggestions to further boost account usage, especially for women, and to facilitate access to a wider range of financial products for individuals and MSMEs.

The Financial Sector Assessment Program (FSAP), a joint programme of the International Monetary Fund (IMF) and the World Bank (WB), undertakes a comprehensive and in-depth analysis of a country's financial sector. Since September 2010, the exercise has become mandatory for jurisdictions with systemically important financial sectors. Currently, it is mandatory for 32 jurisdictions, including India, to be conducted every five years, and for another 15 jurisdictions every 10 years.

As per practice, as a concluding part of the FSAP, the IMF comes out with the Financial System Stability Assessment (FSSA) report, and the World Bank brings out the Financial Sector Assessment (FSA) report. The last FSAP for India was conducted in 2017.

World Bank's FSA report highlights that India's financial system has become more resilient, diversified, and inclusive since the last FSAP in 2017. It was observed that financial sector reforms helped India recover from various distress episodes of the 2010s, as well as the pandemic.

On the regulation and supervision of banks and NBFCs, it said India's expansion of regulatory authority on cooperative banks, tightening of key prudential rules, and reorganisation of regulatory and supervisory departments to enhance effectiveness.

It has also welcomed the scale-based regulation for NBFCs, which recognises the different needs of this diverse industry, and recommended further strengthening of the credit risk management framework for better supervision of banks and NBFCs. For India's capital markets, the report has noted that the capital markets (equity, government bonds and corporate bonds) have increased from 144% to about 175% 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 securitisation platforms to further mobilise capital.