The IMF–World Bank Financial Sector Assessment Program (FSAP) 2024–25 documents that India’s financial system has evolved to be resilient, diversified, and inclusive, compared to the last assessment in 2017, which is in line with a decade of reforms and well-established crisis management frameworks.
Both the IMF’s Financial System Stability Assessment (FSSA), published in February 2025, and the World Bank’s Financial Sector Assessment (FSA), published in October 2025, concur that India’s regulatory improvements, the deepening of the market, and the digital public infrastructure have, in a way, contributed to stability and inclusion and at the same time have paved the way for private capital mobilization for long-term growth.
The report credits India’s reforms after 2017, including the cleaning-up of the banking sector, regulation of the non-banking sector, and development of capital markets, with the system’s capability to absorb the shock of the pandemic and the stress carryover from the 2010s while at the same time maintaining credit intermediation to the real economy. It points out that fulfilling the national goal of a USD 30 trillion economy by 2047 necessitates a continuation of the policy push to deepen the market, attract private investment, and enhance risk management in all kinds of entities.
To begin with, the Reserve Bank of India’s broadening of the regulatory perimeter over cooperative banks, the tightening of prudential norms, and the redirection of supervisory departments have, as a result, improved RBI’s effectiveness and early-warning abilities. The scale-based regulatory framework for non-banking financial companies (NBFCs) adequately differentiates the level of supervision by size and risk profile, thus allowing the sector to be more resilient without discouraging innovation, although it is suggested that further enhancement of credit risk management be undertaken to strengthen the supervision of banks and NBFCs.
The report records that securities market regulation has remained strong despite the rapid market expansion, which has been made possible by initiatives such as the collateral management reforms, investor business continuity protections, sustainable investment frameworks, mutual fund liquidity norms, as well as the creation of the Corporate Debt Market Development Fund (CDMDF) to regain the trust of the bond market. A forward look is referred to in addressing the incorporation of conduct risk monitoring, particularly in mutual funds, and raising the standards of self-regulatory organizations, thus enhancing market integrity in an environment with more participants.
In line with regulatory improvements, India’s Digital Public Infrastructure – Aadhaar, Jan Dhan accounts, and UPI – has significantly helped both men and women to gain access to formal finance, and the proposals are to further increase account usage among women as well as to facilitate the access of a broader range of products to individuals and MSMEs through customized design and data-led delivery.
The assessment records that India is generally consistent with the peers in the insurance sector, and a thorough observance of the Insurance Core Principles is demonstrated by good licensing practices, suitability norms, enforcement powers, and public disclosures – all pointing to the sector’s resilience and regulatory stability. In the area of credit, the enhancement and good usage of the Insolvency and Bankruptcy Code (IBC) together with the RBI’s out-of-court workout frameworks have facilitated the improvement of resolution avenues, and at the same time, MSME finance has been invigorated by TReDS factoring and the Priority Sector Lending structure.
To broaden MSME credit in a viable way, the report proposes that demand-side data should also be included in the monitoring and publication of comprehensive MSME credit statistics, and that an MSME data observatory should be set up to bridge the information gap and facilitate the targeting of interventions. The capital markets have become substantially deeper since the year 2017; the total of equities, government securities, and corporate bonds, in turn, has increased from 144 percent to approximately 175 percent of GDP, which is grounded in a strong market infrastructure and a diversified investor base. The way forward bears on credit enhancement tools, risk-sharing instruments, and securitization platforms to unlock the large-scale long-term capital
The climate risk analysis draws attention to the fact that farming and banking are still capable of withstanding short-term climate shocks, however, it calls for detailed, localized data and flexible measures due to the risks associated with long-term agricultural stress and a complicated low-carbon transition.
In order to direct domestic savings towards green assets and lessen the transition risk, the assessment suggests that climate-related investment should be ramped up through a Sustainable Finance Roadmap and a national Climate Finance taxonomy, which would facilitate investor clarity, product development, and disclosure comparability.
FSAP 2024–25 celebrates India’s financial system as not only resilient but also future-ready thanks to persistent reforms in banking and NBFC supervision, cautious and updated securities regulation, solid insurance oversight, and world-class digital rails that deepen inclusion. Further actions—stronger credit risk management, integrated conduct supervision, MSME data infrastructure, capital-market risk-sharing tools, and a well-defined sustainable finance taxonomy—will most surely unlock private capital further and solidify stability, thus elevating India’s financial sector to be able to contribute to high and stable growth along the way of the 2047 vision.
