India’s Financial Sector Spins An Upward Spiral

With the Indian government implementing a number of reforms to liberalise, regulate and improve this industry, Bhavya Rathod explains how the country’s economy is currently among the most dynamic in the world due to its thriving banking and insurance industries

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India has a diverse financial sector that is rapidly expanding, both in terms of strong growth of the existing financial services and new entrants into the market. Commercial banks, insurance companies, non-banking financial companies, cooperatives, pension funds, mutual funds and other smaller financial entities make up the sector. Of late, the banking regulator has allowed for the formation of new entities such as payment banks, thus diversifying the types of entities operating in the sector. However, the Indian financial sector is dominated by commercial banks, which account for more than 64 percent of the total assets held by the financial system.

The Indian government has implemented several reforms to liberalise, regulate and improve this industry. The government and the Reserve Bank of India (RBI) have taken a number of steps to make it easier for micro, small and medium enterprises (MSMEs) to obtain credit. These measures include establishing a Credit Guarantee Fund Scheme for MSMEs, issuing collateral guidelines to banks and establishing a Micro Units Development and Refinance Agency (MUDRA). With a combined push from the government and the private sector, India has unquestionably become one of the world’s most vibrant capital markets.