From risk to resilience

GLOBAL & DOMESTIC CHANGES INCLUDING TARIFFS WILL IMPACT BFSI WITH NEW OPPORTUNITIES, CHALLENGES

- ASHVIN PAREKH

RECENT GEOPOLITICAL TENSIONS, the US’s major tariff impositions, and India’s proactive response—both through trade diversification and new bilateral arrangements—and the recent goods and services tax (GST) changes are reshaping the opportunities and challenges faced by the Indian banking, financial services, and insurance (BFSI) sector. This article discusses the impacts with sector-specific insights.

The banking sector has fared well in the last couple of years in terms of both asset performance and its treasury operations. Against the backdrop of the developments mentioned above, it will have domestic growth and benefit from the Indian economy’s resilience and robust domestic demand. It will be partly insulated from direct export stocks caused by new tariffs. The recent GST reforms will boost consumption and therefore the economy’s credit needs. The second major opportunity will be digitalisation and financial innovation, seen via the rapid adoption of digital finance, United Payments Interface expansion, and fintech collaborations. The new bilateral agreements will also drive international trade finance opportunities with new international markets, which could be the third major opportunity. Diversified international partnerships and India’s pivot toward Association of Southeast Asian Nations, Latin America, and Africa will reduce over-dependence on US and European Union trade, providing banks with new relationships and infrastructure opportunities. The fourth factor will be via regulatory support. The Reserve Bank of India is expected to induce liquidity and lower interest rates, fostering credit growth and potentially reducing borrowing cost for businesses and consumers. Policymakers are insisting that the GST benefits are passed on to the customers, which will lead to consumption and credit flow, particularly in the housing finance and vehicle loans segments.