The Financial Sector Assessment Program (FSAP) — a collaborative initiative of the International Monetary Fund (IMF) and the World Bank (WB) — plays a crucial role in evaluating the robustness and resilience of financial systems across the globe. Since 2010, countries with systemically important financial sectors undergo this rigorous assessment mandatorily every five years. India, as one of these 32 jurisdictions, last underwent the FSAP in 2017. In 2025, the cycle concluded with the IMF releasing its Financial System Stability Assessment (FSSA) in February 2025, followed by the World Bank’s Financial Sector Assessment (FSA) published on October 30, 2025.
India has welcomed the findings of the joint assessment, which offers a comprehensive perspective on the country’s financial landscape while suggesting reforms essential for sustaining long-term economic ambitions.
Strengthened Resilience and Inclusiveness
According to the World Bank, India’s financial system has become significantly more resilient, diversified, and inclusive since the 2017 assessment. The reforms of the past decade — from banking clean-ups to institutional strengthening — helped India navigate the distress episodes of the 2010s as well as the unprecedented challenges of the COVID-19 pandemic. Yet, as India works toward its ambitious aspiration of becoming a USD 30 trillion economy by 2047, further financial sector reforms will be essential to catalyze private capital.
Banking and NBFC Oversight
The FSA report commends India’s efforts to reinforce bank and NBFC supervision. Key improvements include expanding regulatory oversight over cooperative banks, tightening prudential norms, and reorganizing supervisory departments for better effectiveness. The World Bank also highlighted the introduction of scale-based regulation for NBFCs, acknowledging it as a progressive step that recognizes the sector’s diversity. Still, it suggests strengthening credit risk management frameworks to improve supervision quality across banks and NBFCs.
Securities Market Advancements
Oversight in India’s securities markets has also been recognized as robust. Reforms such as improved collateral management, enhanced business continuity frameworks, mutual fund liquidity regulations, and the establishment of the Corporate Debt Market Development Fund (CDMDF) have strengthened market integrity. Looking ahead, the World Bank suggests developing integrated monitoring systems for conduct risks — especially in mutual funds — and elevating standards for self-regulatory organizations.
Digital Public Infrastructure and Financial Inclusion
India’s globally acclaimed Digital Public Infrastructure continues to be a major enabler of financial inclusion. Government programs, coupled with digital innovation, have broadened access to financial services across gender and socio-economic groups. The FSA encourages India to focus next on increasing account usage among women and enabling wider access to financial products for individuals and MSMEs.
Insurance, Climate Risk, and MSME Finance
The insurance sector has kept pace with global peers, demonstrating strong adherence to Insurance Core Principles. In climate risk analysis, while the banking and agriculture sectors appear resilient to short-term shocks, the World Bank emphasizes the need for granular data and adaptive strategies to mitigate local and long-term risks. The FSA also highlights significant progress in MSME financing, credit infrastructure reforms, and digital factoring through TReDS, while recommending enhanced data collection and a dedicated MSME data observatory.
Capital Market Growth
India’s capital markets have expanded impressively, rising from 144% to 175% of GDP since 2017. To harness their full potential, the World Bank suggests mechanisms such as credit enhancement, risk-sharing facilities, and securitization platforms that can mobilize greater volumes of capital.
Overall, the 2025 FSAP acknowledges India’s major strides while offering a roadmap for continued modernization and resilience-building. With a commitment to global best practices and reforms aligned to domestic priorities, India’s financial sector stands well-positioned to support sustained economic growth in the decades ahead.