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SBI: India’s non-banking financial sector grew by 10%; declined globally by 3 %

India’s non-banking financial sector saw a growth of 10 per cent, while globally the sector declined by 3 per cent, according to a report by SBI. Non-banking financial institutions, which do not have a full banking license and cannot accept public deposits, mainly focus on lending and financing activities.

The report noted that globally, the size of the non-bank financial intermediation (NBFI) sector decreased by 3 per cent in 2022, the first notable decrease in a while. However, entities undertaking lending activities, similar to NBFCs in India, experienced a growth of around 10 per cent, the highest among all economic categories in the NBFI sector.

India was highlighted as the third-largest player in the non-banking financial sector, following the United States and the United Kingdom. Over the past decade, the Indian banking system has shown resilience in overcoming challenges from both domestic and international economic environments.

The report attributed the improvement in asset quality and strong macroeconomic fundamentals as crucial factors in enhancing the Indian banking sector. The Indian government and regulatory bodies have worked towards creating a level playing field for financial institutions through initiatives like bank mergers, capital infusion, governance improvements, and the expansion of financial services and digital banking adoption.

During the pandemic, the government maintained financial sector stability through capital and liquidity buffers, with the RBI taking proactive measures to ensure stability. The RBI’s efforts in enforcing regulatory measures have helped cushion the sector against economic shocks, fostering growth and innovation.

India has also seen significant advancements in digital banking, with the transition to digital platforms contributing to sector growth. This shift has increased access to financial services, making them more inclusive and efficient. The government and regulatory bodies have prioritized customer protection amidst the digital transformation, safeguarding public interests.

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