Why in the News?
The World Bank’s November 2025 Financial Sector Assessment (FSA) Report says India must deepen financial reforms and boost private capital to reach its $30 trillion economy goal by 2047.
What is the Financial Sector Assessment (FSA) Report?
- Overview: It is a joint evaluation by the IMF and World Bank under the Financial Sector Assessment Program (FSAP), launched in 1999 to review a country’s financial stability and institutional soundness.
- Objective: Assesses the resilience, inclusiveness, and stability of the financial system, analysing how well it supports sustainable and equitable growth.
- Scope: Covers banks, NBFCs, insurance, capital markets, and payment systems, along with regulation, supervision, and crisis management frameworks.
- Methodology: Uses stress tests, policy diagnostics, and supervisory assessments to evaluate financial soundness and regulatory effectiveness.
- Frequency: Conducted every 5–7 years, tracking policy reforms and emerging risks in both advanced and emerging economies.
Key Highlights: India’s FSA Report 2025
- Improved Stability: Found India’s financial system more diversified, inclusive, and resilient than in 2017, aided by regulatory reforms.
- Reform Success: Credited India for recovering from the 2010s banking crisis and COVID-19 shocks through RBI’s tighter supervision of banks and NBFCs.
- Regulatory Strengthening: Praised the extension of RBI’s authority over cooperative banks and scale-based regulation for NBFCs.
- Digital Financial Inclusion: Highlighted India’s UPI, Aadhaar, and Jan Dhan ecosystem as global benchmarks for financial access and gender inclusion.
- Capital Market Expansion: Reported capital markets’ size rising from 144% to 175% of GDP since 2017, driven by investor confidence and strong infrastructure.
- Policy Recommendations: Advised improving credit-risk management, developing conduct-risk oversight for mutual funds, and empowering self-regulatory bodies.
- Private Capital Mobilization: Urged creation of credit-enhancement and securitization platforms to attract global long-term investors.
- Strategic Vision: Emphasized that continued reforms, deeper markets, and financial integration are essential to achieving India’s $30 trillion economy goal by 2047.
| [UPSC 2015] Which one of the following issues the ‘Global Economic Prospects’ report periodically? Options: (a) The Asian Development Bank (b) The European Bank for Reconstruction and Development (c) The US Federal Reserve Bank (d) The World Bank* |
