Technology must to spur growth of India's BFSI sector

Chief Guest at Finnoviti 2021, India’s largest innovation carnival, Dr. Krishnamurthy Subramanian, Chief Economic Advisor, Government of India, highlights the importance of technology that could spur the growth of the Indian banking and financial sector. Excerpts of from his interaction Manoj Agarwal and Mehul Dani of Banking Frontiers:

Manoj: Would you like to begin by giving a perspective of Indian financial system versus the financial system in some large countriesthat you think we can be inspired from?

Dr Subramanian: The Indian banking sector can claim credit in domestic comparison. But when it comes to international comparison, I think on most metrics, the Indian banking sector has miles to go.

If you look at the credit penetration metric - private sector credit to GDP, in India, it is about 52-53%. In other words, half of our GDP is out of private sector credit. The average for the OECD (The Organization for Economic Co-operation and Development) economy is of the order of 160%. We are one-third of that average. Now, if you take a section of the country like north-east, and compare it to OECD economies, we are 1-16th of that average.

Again, if you look at the number and scale of banks in India and keep in the mind that India is the 5th largest economy in the world, we should have about 7 or 8 banks in the global top 100. And yet we have only 1 bank in global top 100, and that is 55th rank - State Bank of India.

Look at any large economy, say Japan in 1980s. Japan, in its heyday, had 18 banks in the top 100. Today, similarly, 18 of the top 100 banks are Chinese.