‘Specialised banks needed for niche mkts’

India’s banking, financial services, and insurance (BFSI) sector is at an inflection point with a sharp rise in its size, profitability, and balance-sheet strength in recent years.

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The recent macroeconomic uncertainty and volatility in the global economy have thrown a new challenge to the thriving BFSI ecosystem. M Nagaraju, secretary, Department of Financial Services, Ministry of Finance, in a conversation with A K Bhattacharya, talks of the challenges and the opportunities that lie ahead of the sector. Edited excerpts:

How is India’s financial sector faring in a world that is facing uncertainties amid emerging challenges such as de-dollarisation?

The sector is now the biggest and strongest ever in the country’s history. Public-sector banks (PSBs) made their highest ever profits last year and their dividend payout to shareholders was also at a record high (and this includes the scheduled commercial banks). The financial strength of the BFSI sector also shows in the provision coverage ratio, which is more than 94 per cent compared to 48-49 per cent in 2014-15.

The financial and operational turnaround of PSBs has been the highlight of the sector in recent years and they (PSBs) are now setting benchmarks for the BFSI segment. The government has taken a number of measures, legislative and procedural, and this is showing results.

Gross nonperforming assets (NPAs) of PSBs have dropped to just 2.2 per cent (of their assets) from being in double digits just a few years ago. Similarly, their net NPAs declined to about 0.52 per cent (of their assets), one of the lowest ever.

How do you view the recent performance of the Indian economy?

The economy continues to do well despite rising global macroeconomic uncertainties. We are among the brightest spots in the global economy with gross domestic product (GDP) growing at a steady pace of 6.5-6.6 per cent. Our external front remains strong without any significant outflow of capital from the country.