The Government of India has released an important update on the Financial Sector Assessment Program (FSAP) 2024, a joint initiative conducted by the International Monetary Fund (IMF) and the World Bank (WB). FSAP is one of the most rigorous global evaluations of a country’s financial ecosystem, examining its stability, regulatory framework, resilience, and developmental needs. For countries with systemically important financial sectors—such as India—this assessment is mandatory every five years.
The last assessment for India was conducted in 2017. In 2025, both institutions released their updated evaluations:
- IMF’s Financial System Stability Assessment (FSSA) in February 2025
- World Bank’s Financial Sector Assessment (FSA) in October 2025
India has welcomed the findings, which collectively underline the country’s progress in building a robust and forward-looking financial architecture.
India’s Financial Sector: Stronger, More Inclusive, and More Resilient
The World Bank’s 2025 FSA report acknowledges that India’s financial system has significantly strengthened since the last FSAP. Despite challenges over the past decade—from banking sector stress in the mid-2010s to economic disruptions during the pandemic—policy reforms have enabled a remarkable recovery.
1. Banking & NBFC Oversight Has Improved
The report highlights several regulatory achievements:
- Expansion of regulatory supervision to cooperative banks
- Strengthened prudential rules
- Reorganization of supervisory departments for better enforcement
- Introduction of the scale-based regulatory framework for NBFCs
However, the World Bank recommends further enhancement of credit risk management to ensure deeper and more timely supervision.
2. Securities Market Oversight: Sound and Evolving
India’s securities market has seen transformational growth backed by strong regulatory reforms. The World Bank notes progress in:
- Collateral management
- Investor continuity systems
- Liquidity norms for mutual funds
- Framework for sustainable investments
- Establishment of the Corporate Debt Market Development Fund (CDMDF)
For future improvements, it suggests a more integrated monitoring approach for conduct risks, especially in mutual funds, and strengthening self-regulatory organizations.
3. Digital Public Infrastructure: A Catalyst for Financial Inclusion
The report acknowledges India’s world-class Digital Public Infrastructure (DPI), which has enabled widespread financial access. Government programs have particularly improved access for women and underserved groups. To sustain momentum, it recommends promoting higher account usage among women and expanding product access for individuals and MSMEs.
4. Insurance Sector: Stable and Globally Aligned
India’s insurance sector has demonstrated solid adherence to the Insurance Core Principles (ICPs). Strengths include:
- Licensing standards
- Suitability norms
- Enforcement frameworks
- Transparency and public disclosure
5. Climate Risk: Preparing for Long-Term Resilience
While India’s banking and agricultural sectors are relatively resilient to short-term climate shocks, the report urges the need for:
- Granular climate risk data
- A national Sustainable Finance Roadmap
- A formal Climate Finance Taxonomy to guide investments
These measures would help manage localized climate risks and support India’s low-carbon transition.
6. MSME Financing & Credit Infrastructure
Major improvements have been noted in:
- Growth in MSME lending
- Strengthening of the Insolvency and Bankruptcy Code (IBC)
- Development of the TReDS platform for factoring
To further empower MSMEs, the World Bank recommends setting up a national MSME data observatory and publishing comprehensive credit data—including demand-side metrics.
7. Capital Markets: Growing Depth and Wider Participation
India’s capital markets—equity, government bonds, and corporate bonds—have expanded from 144% to 175% of GDP since 2017. To deepen markets further, the report suggests building:
- Credit enhancement facilities
- Risk-sharing frameworks
- Securitization platforms
Conclusion: A Roadmap for the Future
The government notes that many of the recommendations already align with existing reform agendas. India remains committed to adopting global best practices, integrating them with domestic priorities to maintain stability while fostering economic growth.
The full World Bank FSA report is publicly accessible and offers deeper insights into the future course of financial sector reforms.