India’s financial system is gradually maturing as it moves away from banks, says RBI Governor Shaktikanta Das

  • While banks have been the main channels of credit in the economy, recent trends suggest an increasing role of non-bank channels, said RBI Governor Shaktikanta Das.
  • The Indian financial system has moved from a banking system to a hybrid system.
  • While the pandemic has created huge challenges, Das said, it is also acting as an inflection point to change the course of development.

the Reserve Bank of India Governor Shaktikanta Das, in remarks at the 48th convention of
All India Management Association, said India’s financial landscape is becoming increasingly vibrant and resilient as the assets of nonbanks and mutual funds grow.

The Indian financial system, he said, has rapidly transformed to meet the growing needs of the economy. “While banks have been the primary credit channels in the economy, recent trends suggest an increasing role for non-bank channels. ”

The growth in the assets of non-bank financial intermediaries, including non-bank lenders and mutual funds, as well as the increase in financing through corporate bonds has helped the Indian financial system to move away from banking leadership.

“This is a sign of a constantly evolving financial system moving from a financial system dominated by banks to a hybrid system,” he added.

This comes as the balance sheet of non-bank financial corporations (NBFC) saw double-digit year-on-year growth in the quarter of 13% and 12%, respectively, over the three months ended September and December of last year. As of December 2020, the total assets of NBFCs in the country stood at 2.43 lakh crore.

“However, this double-digit growth in an unfavorable macroeconomic environment indicates the resilience of NBFCs, which have been able to cushion the impact of the pandemic on their balance sheets through rapid adoption of technology, political support and reasonably strong fundamentals. “the RBI said in its May

Despite the impact of the second wave of the pandemic, ICRA said in a July memo that about 42% of the 65 non-banks polled by the rating agency expected growth of more than 15%. of their assets under management (AUM) during the 2021-22 financial year.

In addition, Das also highlighted the progress made in strengthening the cybersecurity capacity of the financial sector. “Substantial progress has been made in strengthening the internal defense mechanism of financial institutions to identify, measure and mitigate risks. This is an ongoing process and the efforts of all stakeholders will need to be sustained, ”he said.

On financial inclusion

Das also highlighted the impact of the COVID-19 pandemic on poor and vulnerable segments of society. This is because day workers, service workers and the informal sector have been hit hard during the pandemic, as their employment and income opportunities have been reduced.

“The lasting damage inflicted by the pandemic on these segments is a serious concern for inclusive growth. In the medium and long term, efficiency and equity will be of great importance for sustainable growth and macroeconomic performance, ”he said.

Additionally, Das said financial inclusion also faces a challenge of growing automation during the pandemic. “Such a scenario requires significant qualification / training of our workforce. We must also guard against any emergence of a ‘digital divide’ as digitization accelerates after the pandemic, ”he said.

While the pandemic has created huge challenges, Das said, it is also acting as an inflection point to change the course of development. “Creating income and jobs with digitization and innovation can bring a new era of prosperity for a large number of people,” he said.

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Don F. Davis