The world has seen how finance can grow, balloon and burst, casting a spell of recession across major economies. In light of these experiences, financial sector regulators are watchful of the excessive growth of finance. For regulators in emerging markets, the onus goes beyond managing the growth of finance. They must also transform the growth of finance into finance for growth. As Chapter 3 of the Economic Survey 2025-26 writes, the financial sector was well-anchored in 2025 due to the superlative regulatory performance of the RBI, SEBI, and other major financial sector regulators.
Three major policy moves displayed regulatory sophistication on the part of financial sector regulators in 2025. The RBI’s ‘Framework for Formulation of Regulations’, which was released in May 2025, constructs a paradigm for making high-quality regulations. It emphasises transparency, stakeholder consultation, impact assessments, and periodic reviews. Secondly, the year also saw the Central Bank conduct a major overhaul of its regulatory instructions, consolidating over 9,000 existing circulars and replacing them with 238 specific master directions. The massive consolidation will ease compliance burden for regulated entities and improve the ease of doing business. Finally, SEBI’s Securities Market Code 2025 represented an important step towards consolidating the legal framework and strengthening the foundations of securities market regulation in India. The code brings together fragmented laws governing the security markets, positioning regulatory governance as its focal point.
Regulatory efficiency can be observed across other parts of the financial sector. Since the IBC’s enactment a decade ago, India’s bankruptcy regime has contributed to credit discipline, reduction in banking sector NPAs and greater predictability in insolvency outcomes. As a testament to the improvements in the regime, the ratio of resolution-to-liquidation has improved from 20 per cent in FY18 to 91 per cent in FY25. Reflecting these systemic changes, the S&P Global Ratings upgraded India’s insolvency regime from Group C to Group B in December 2025. The rating agency noted that average recovery rates have improved from 15-20 per cent under the pre-IBC regime to approximately 30 per cent, while resolution timelines have reduced from 6-8 years to about 2 years.
In the insurance sector, the enactment of the ‘Sabka Bima, Sabki Suraksha Act, 2025’ beckons a landmark shift in the sector. It raises the FDI limit to 100 per cent, allows for the entry of more players, raises policyholders’ protection and incorporates measures to improve the ease of doing business. The pensions sector too marked its 10th year of the Atal Pension Yojana (APY) – a pension scheme largely targeted towards India’s informal sector. APY subscriptions have grown at a high CAGR of 43.7 per cent since its inception and AUM have shown exemplary growth at a CAGR of 64.5 per cent.
Even as improvements to the regulatory architecture aids efficiency across all market players, targeted intervention has enhanced financial inclusion outcomes in the country. The survey takes the case of two such targeted interventions – PM SVANidhi and PMMY. Both schemes display high inclusivity metrics and strong re-payment performance.
Over the past decade, the emergence of India’s digital public infrastructure (DPI) has further provided a scaffolding for financial inclusion to thrive. As a result, large scale uptake of tools such as India’s UPI interface is contributing to raising financial inclusion and improved credit delivery in the country.
Taken together, the progress achieved by India’s financial sector regulators is indeed noteworthy. These reforms come at a time when global uncertainty has peaked, in turn signalling to the investor that Indian regulators are prepared to tide the wave. Of course, the reforms serve much more than a signaling imperative. They are creating an enabling environment for India to expand its productive base. The Survey provides a glimpse of the philosophy that should guide the next phase of reforms.
The next phase of reforms should be guided by improved regulatory coordination. With improvements to financial innovation, the lines are increasingly blurred between the domains of various financial sector regulators. Banks distribute insurance and mutual funds; NBFCs perform functions similar to those of banks; fintechs intermediate credit and payments. In this context, enhanced inter-agency coordination is required for effective oversight of increasingly complex and inter-connected financial entities.
To finance sustained growth, India must strengthen its long-term capital markets. Corporate bond markets remain shallow and illiquid, dominated by top-rated issuers. Securitisation is limited, municipal bonds are underdeveloped, and pension and insurance funds remain conservative investors due to regulatory and cultural inertia. The next phase of reforms should involve a coordinated agenda which addresses these issues.
India’s financial sector regulators face the triple mandate of curbing excesses within the financial system, ensuring that the financial system aids growth and signaling stability and certainty in a world cloaked in uncertainty. As we have seen so far, this mandate is being deftly and creatively handled across board. The reforms taken together aim to shape a financial system that is stable yet competitive, diversified yet resilient, and innovation-friendly yet safe. Banks will remain central, but they must be seen as one part of a richer ecosystem that includes non-bank intermediaries and markets. Such a system reduces capital costs, expands financing options, facilitates structural transformation, and enhances the economy’s adaptive capacity.
Our aspiration to become Viksit Bharat by mid-century demands a fundamental rethinking of finance, not merely as funding, but as the architecture of economic transformation. Finance, in its broader institutional and behavioural sense, governs how effectively capital is mobilised, allocated, and sustained across the economy. It is the central enabler. When finance builds trust, fosters competition, and enables innovation, it becomes the catalyst of development. A nation does not develop by spending more but by expanding its productive base—enabling firms to invest and scale, households to earn and save securely, and markets to channel capital efficiently. This requires an enabling environment: rational taxation that supports enterprise, regulators that foster competition, financial markets that deepen and diversify, and administrative systems that operate transparently and promptly. Finance for Viksit Bharat is therefore about shaping conditions that generate and deploy resources efficiently
Respectively, Chief Economic Adviser to the Government of India, officer of the Indian Economic Service and Consultant in the Economic Division. Views are personal.
Three major policy moves displayed regulatory sophistication on the part of financial sector regulators in 2025. The RBI’s ‘Framework for Formulation of Regulations’, which was released in May 2025, constructs a paradigm for making high-quality regulations. It emphasises transparency, stakeholder consultation, impact assessments, and periodic reviews. Secondly, the year also saw the Central Bank conduct a major overhaul of its regulatory instructions, consolidating over 9,000 existing circulars and replacing them with 238 specific master directions. The massive consolidation will ease compliance burden for regulated entities and improve the ease of doing business. Finally, SEBI’s Securities Market Code 2025 represented an important step towards consolidating the legal framework and strengthening the foundations of securities market regulation in India. The code brings together fragmented laws governing the security markets, positioning regulatory governance as its focal point.
Regulatory efficiency can be observed across other parts of the financial sector. Since the IBC’s enactment a decade ago, India’s bankruptcy regime has contributed to credit discipline, reduction in banking sector NPAs and greater predictability in insolvency outcomes. As a testament to the improvements in the regime, the ratio of resolution-to-liquidation has improved from 20 per cent in FY18 to 91 per cent in FY25. Reflecting these systemic changes, the S&P Global Ratings upgraded India’s insolvency regime from Group C to Group B in December 2025. The rating agency noted that average recovery rates have improved from 15-20 per cent under the pre-IBC regime to approximately 30 per cent, while resolution timelines have reduced from 6-8 years to about 2 years.
In the insurance sector, the enactment of the ‘Sabka Bima, Sabki Suraksha Act, 2025’ beckons a landmark shift in the sector. It raises the FDI limit to 100 per cent, allows for the entry of more players, raises policyholders’ protection and incorporates measures to improve the ease of doing business. The pensions sector too marked its 10th year of the Atal Pension Yojana (APY) – a pension scheme largely targeted towards India’s informal sector. APY subscriptions have grown at a high CAGR of 43.7 per cent since its inception and AUM have shown exemplary growth at a CAGR of 64.5 per cent.
Even as improvements to the regulatory architecture aids efficiency across all market players, targeted intervention has enhanced financial inclusion outcomes in the country. The survey takes the case of two such targeted interventions – PM SVANidhi and PMMY. Both schemes display high inclusivity metrics and strong re-payment performance.
Over the past decade, the emergence of India’s digital public infrastructure (DPI) has further provided a scaffolding for financial inclusion to thrive. As a result, large scale uptake of tools such as India’s UPI interface is contributing to raising financial inclusion and improved credit delivery in the country.
Taken together, the progress achieved by India’s financial sector regulators is indeed noteworthy. These reforms come at a time when global uncertainty has peaked, in turn signalling to the investor that Indian regulators are prepared to tide the wave. Of course, the reforms serve much more than a signaling imperative. They are creating an enabling environment for India to expand its productive base. The Survey provides a glimpse of the philosophy that should guide the next phase of reforms.
The next phase of reforms should be guided by improved regulatory coordination. With improvements to financial innovation, the lines are increasingly blurred between the domains of various financial sector regulators. Banks distribute insurance and mutual funds; NBFCs perform functions similar to those of banks; fintechs intermediate credit and payments. In this context, enhanced inter-agency coordination is required for effective oversight of increasingly complex and inter-connected financial entities.
To finance sustained growth, India must strengthen its long-term capital markets. Corporate bond markets remain shallow and illiquid, dominated by top-rated issuers. Securitisation is limited, municipal bonds are underdeveloped, and pension and insurance funds remain conservative investors due to regulatory and cultural inertia. The next phase of reforms should involve a coordinated agenda which addresses these issues.
India’s financial sector regulators face the triple mandate of curbing excesses within the financial system, ensuring that the financial system aids growth and signaling stability and certainty in a world cloaked in uncertainty. As we have seen so far, this mandate is being deftly and creatively handled across board. The reforms taken together aim to shape a financial system that is stable yet competitive, diversified yet resilient, and innovation-friendly yet safe. Banks will remain central, but they must be seen as one part of a richer ecosystem that includes non-bank intermediaries and markets. Such a system reduces capital costs, expands financing options, facilitates structural transformation, and enhances the economy’s adaptive capacity.
Our aspiration to become Viksit Bharat by mid-century demands a fundamental rethinking of finance, not merely as funding, but as the architecture of economic transformation. Finance, in its broader institutional and behavioural sense, governs how effectively capital is mobilised, allocated, and sustained across the economy. It is the central enabler. When finance builds trust, fosters competition, and enables innovation, it becomes the catalyst of development. A nation does not develop by spending more but by expanding its productive base—enabling firms to invest and scale, households to earn and save securely, and markets to channel capital efficiently. This requires an enabling environment: rational taxation that supports enterprise, regulators that foster competition, financial markets that deepen and diversify, and administrative systems that operate transparently and promptly. Finance for Viksit Bharat is therefore about shaping conditions that generate and deploy resources efficiently
Respectively, Chief Economic Adviser to the Government of India, officer of the Indian Economic Service and Consultant in the Economic Division. Views are personal.
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