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Informist, Friday, Jul. 25, 2025

MUMBAI – India needs to review its foreign direct investment norms so that banks here can have access to more funds, M. Nagaraju, secretary, Department of Financial Services, Ministry of Finance, said Friday. "Universal financial inclusion is another challenge that I see that needs to be addressed," Nagaraju said. He was speaking at the Modern BFSI Summit in Mumbai.

On the importance of foreign capital, Nagaraju said access to foreign capital will reduce the cost of funds for Indian banks and should be welcomed.

Banks need to play a pivotal role if India is to meet the "Viksit Bharat" aim by 2047, Nagaraju said. Indian banks need to look towards markets to raise substantial capital to fund growth, he said. "At the top of the capitalistic infrastructure level, Indian banks must raise substantial amounts of capital to support the country's growth ambitions. I am of the opinion that the country's banks are working to raise more funds and support greater expansion. Therefore, access to capital from all sources needs to be looked at and reviewed by all of us," Nagaraju said.

How banks reimagine deposit mobilisation is going to play a key role going forward, Nagaraju said. While banks can rely on traditional forms of funding growth, they need to look at new avenues to raise funds as well, he said. Banks should also look to optimise operations to bring down costs, he said.

"Large, incumbent banks should focus on capital conservation by reducing operations costs, especially for countries with huge costs of intermediation in the banking industry. Emerging technologies such as AI (artificial intelligence), cloud computing, etc. have immense potential to drive efficiency across the industry, improve liquidity complexes, ensure high-quality services, and enhance security measures," Nagaraju said.

Overall, the banking sector is expected to see a pick-up in credit growth in the coming period led by a pick-up in corporate advances, despite a slowdown in the current quarter, the banking secretary said.

Indian banks should also look at making innovative products to attract young savers, Nagaraju said. "The more we spend for the economy, the better that is, but still we also have to save. And so, therefore, banks should come up with products that will serve the needs of the young generation, because they are hugely valuable," he said.

On the regulatory front, the banking secretary said he is hopeful that the insurance bill will be listed in the next session of Parliament. The bill proposes to allow insurers to offer both life and non-life insurance products under a single licence. This would mean life insurers would be able to offer general insurance products such as motor vehicle and health insurance, and vice versa. The bill also proposes to raise the limit on foreign investment in Indian insurance companies to 100% from the current 74%.

Nagaraju also emphasised strengthening the Unified Payments Interface in rural areas. On the cost that banks have to incur to operate the Unified Payments Interface, he remarked that not all operations banks are involved in are supposed to be for profit.

Talking about the scope of growth in micro, small, and medium enterprises sector, Nagaraju said banks need to ensure that the flow of credit to the sector remains robust. He also said an increase in the limit of the credit guarantee scheme is on the cards. "Given MSMEs' contribution to India's percentage of exports and 62% of employment, we need to have a robust approach to MSMEs such as providing access to critical services and support for entrepreneurship like the rest of the world," he said.

To compete on a global scale, Indian banks, non-banking finance companies, and financial technology companies need to work in tandem, Nagaraju said. He said the balance sheets of Indian banks and corporations are among the healthiest globally. He expressed the hope that India's GDP will surpass Japan's in the current financial year despite geopolitical tensions around the world.  End

Reported by Kabir Sharma and Vaishali Tyagi

Edited by Ashish Shirke and Rajeev Pai

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