The financial sector in India has survived the pandemic well, shown improved resilience and is more diverse since the country’s last assessment in 2017, the International Monetary Fund (IMF) says in a recent .
The IMF and the World Bank conduct a comprehensive analysis of the stability of financial systems in 32 countries every five years called the Financial Sector Assessment Program and both organisations release separate reports.
The report said India had seen an increase in the number of non-banking financial institutions and companies (NBFCs) providing credit, leading to a diverse and interconnected financial system in the country. It also noted that sufficient capital exists in banks and NBFCs to support moderate lending.
The IMF report suggested that the legal, tax and information infrastructure could be strengthened for asset-based digital lending to provide increased access to capital for underserved sectors.
For areas that required focused attention and approach, the IMF highlighted cybersecurity, climate change and system-wide contagion as emerging risks. It said climate change-related financial risks may appear manageable, but they required careful monitoring. The report said India should start enhanced data coverage for granular mapping of financial risks related to climate change.
The IMF also said banks could simulate crises across sectors in market-wide events as tests to improve cybersecurity resilience. The Securities and Exchange Board of India has the IMF report.
