Lessons from outperformance in the Indian financial sector

20.500.12592/dgwx9b

Lessons from outperformance in the Indian financial sector

10 Feb 2023

The share of non-bank financing of the commercial sector rose to 70.8% in 2020–21 compared to 47.7% in 2018–19 (Table 2). [...] In the absence of a development finance institution (DFI) and under over-optimism in boom conditions, PSBs were persuaded to lend to private sector firms for infrastructure, regardless of the ALM mismatch. [...] In some softening of the over-reaction, the 2020 Amendment to the 2013 revision of the Company Act, made the required distinction between commercial and criminal activities. [...] There is space to safely expand credit as part of the monetary-fiscal response to multiple crises and for the financial sector to continue to outperform. [...] The learning for AEs and EMs are to avoid policy over-reaction and pre-conceptions, aim for diversity, for different types of exposures and uniformity of regulation in the financial sector, with the appropriate balance between discipline and support.
Pages
26
Published in
India