India’s financial ecosystem is displaying greater resilience and diversity, supported by sustained economic momentum and an evolving regulatory regime aligned with global benchmarks, the Securities and Exchange Board of India (SEBI) said on Saturday.
The remarks came in the backdrop of the latest Financial System Stability Assessment (FSSA) report by the International Monetary Fund (IMF), which reviewed India under the joint IMF-World Bank Financial Sector Assessment Programme (FSAP), reported IANS.
According to SEBI, the IMF report recognised India’s efforts to strengthen its financial architecture following a series of market shocks in the 2010s, as well as the economy’s ability to withstand pandemic-induced stress.
NBFC Oversight and Market Reforms Noted
The FSSA report underlined the increasing complexity and interconnectedness of India’s non-banking financial intermediaries. While the sector has become more diverse, systemic links between Non-Banking Financial Companies (NBFCs) and traditional banks have deepened. Despite this, the IMF assessed that both banks and NBFCs have enough capital buffers to continue lending even under significant financial stress.
Acknowledging India’s structured approach to NBFC regulation, the IMF highlighted the implementation of a scale-based regulatory framework and the application of a Liquidity Coverage Ratio (LCR) for large NBFCs—measures intended to enhance financial stability.
In terms of market reforms, the establishment of the Corporate Debt Market Development Fund (CDMDF) and the adoption of swing pricing mechanisms for bond mutual funds were cited as positive steps. Enhanced liquidity norms for these funds also featured among the improvements.
Insurance Sector Stable, Supervisory Practices Evolving
The FSSA findings also acknowledged the strength of India’s insurance landscape, describing it as “strong and growing,” with notable presence in both life and general segments. “This reflects India’s commitment to global best practices and a resilient insurance sector,” SEBI said in a statement.
However, the IMF suggested that India should further refine its supervision models by moving towards risk-based solvency standards and deepening group-level oversight. It also advocated for the adoption of the International Financial Reporting Standard (IFRS) 9 to improve credit risk assessments across the banking sector.
The regulatory framework has been gradually expanding to address emerging areas such as sustainability and investor safeguards in the fast-growing equity derivatives market, SEBI noted, echoing the IMF’s findings.
The FSSA is part of the broader FSAP initiative, which conducts thorough evaluations of countries’ financial systems, focusing on resilience, regulatory standards, and institutional robustness.
