The World Bank has released its Financial Sector Assessment (FSA) Report 2024 for India under the Financial Sector Assessment Program (FSAP)—a joint initiative with the IMF designed to evaluate the health, stability, and resilience of a country’s financial system. This exercise is mandatory for countries with systemically important financial sectors and is conducted every five years. India’s previous FSAP was completed in 2017, making the 2024 assessment particularly significant for policymakers, regulators, and financial market participants.
A Stronger, More Resilient Financial Sector
According to the report, India’s financial system has become more resilient, diverse, and inclusive since 2017. A series of reforms in the last decade—especially regulatory tightening, governance improvements, and digital innovations—helped the economy recover from past financial stress, including the pandemic. The World Bank notes that India’s ambition to become a USD 30 trillion economy by 2047 will require sustained reforms and greater private capital mobilization.
Banking & NBFC Oversight Strengthened
The FSA report acknowledges India’s continued progress in strengthening the regulation and supervision of banks and NBFCs. Key measures appreciated by the World Bank include:
Expansion of regulatory powers over cooperative banks
Tighter prudential norms
Reorganization of supervisory departments
Adoption of scale-based regulation for NBFCs
However, the report also stresses the need to further enhance credit risk management systems to safeguard stability as financial institutions grow in size and complexity.
Robust Securities Market Reforms
India’s securities markets have seen major improvements, with reforms in:
Collateral management
Investor protection
Mutual fund liquidity norms
Corporate Debt Market Development Fund (CDMDF)
Sustainability-focused investment frameworks
The World Bank recommends developing an integrated approach to monitoring conduct risks, especially in mutual funds, and enhancing the role of self-regulatory organizations.
Digital Public Infrastructure Praised Globally
The FSA report highlights India’s world-class Digital Public Infrastructure—including UPI, Aadhaar, and related systems—which has expanded financial access across gender and income groups. The World Bank suggests increasing account usage among women and enabling easier access to diverse financial products for individuals and MSMEs.
Insurance Sector Shows Strong Compliance
India’s insurance sector continues to grow in line with global peers. The World Bank notes strong performance in:
Licensing
Suitability norms
Enforcement powers
Public disclosures
This reflects India’s strong adherence to global Insurance Core Principles (ICPs).
Climate Risk: Need for Granular Data & Planning
While India’s agriculture and banking sectors are resilient to short-term climate shocks, the report warns of growing risks from prolonged climate stress and low-carbon transition challenges. It recommends creating a Climate Finance Taxonomy and a Sustainable Finance Roadmap to support climate-aligned investments in the future.
Capital Markets Growing Faster Than GDP
India’s capital markets—equity, government bonds, and corporate bonds—have expanded from 144% to 175% of GDP since the last FSAP. The World Bank recommends boosting capital mobilization through:
Credit enhancement tools
Risk-sharing mechanisms
Securitization platforms
The World Bank’s FSA 2024 recognizes India’s impressive financial sector growth but also highlights areas where continued reforms can unlock greater capital, inclusion, and resilience. With India’s long-term vision of becoming a USD 30 trillion economy, the recommendations offer a clear roadmap for strengthening the country’s financial foundations.