Revamping India’s Financial Landscape: A Call for Comprehensive Service Expansion

Sanjiv Bajaj, President of the Confederation of Indian Industry, recently addressed the need for a wider distribution of financial services in India. During a CII event in Mumbai, he emphasized that banks are not well-suited for long-term project funding due to a mismatch between their assets and liabilities. Instead, he suggested that funding should come from the debt Market, particularly through insurance and pension funds. Bajaj noted that India’s capital markets are underdeveloped and called for improved regulatory harmony to foster innovation. He highlighted a significant credit gap in the MSME sector, which accounts for 30% of India’s GDP, stressing the importance of not only increasing access to credit but ensuring its quality as well.

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Title: Sanjiv Bajaj Calls for Improved Financial Services in India

Last Updated: September 02, 2024, 4:10 PM IST

In a recent event hosted by the Confederation of Indian Industry (CII) in Mumbai, Sanjiv Bajaj, the Managing Director of Bajaj Finserv, emphasized the urgent need for a broader range of financial services in India. He stated that banks are not well-suited for financing long-term projects and that funding should ideally come from the debt Market, specifically through insurance and pension funds.

Bajaj explained that there is a significant mismatch between the assets and liabilities of banks, which makes them less effective for long-term lending. Instead, he suggested utilizing the debt Market to tap into the potential of insurance and pension investments. He pointed out the relatively small scale of India’s insurance and pension sectors, noting that their investment capabilities for long-term projects are currently limited.

Bajaj raised concerns about India’s underdeveloped capital markets and the need for an enhanced bond Market. He believes that new financial products and a greater variety of industry participants could help facilitate this growth. He highlighted the necessity for financial services to reach every corner of the country, which involves harmonizing policies across different regulatory bodies to foster innovation.

The financial sector’s contribution to India’s economy has been substantial, growing from around $300 billion to $3.5 trillion in recent years. However, Bajaj noted that while the country’s credit-to-GDP ratio remains low at around 30%, countries like the US and UK have ratios between 70-80%. He underscored the need for better access to formal financial credit for the Micro, Small, and Medium Enterprises (MSMEs) sector, which accounts for 30% of India’s GDP. Currently, only about 15% of MSMEs have access to necessary credit, leaving a credit gap of approximately Rs 22 to 25 trillion.

In conclusion, Bajaj stressed the importance of not just increasing access to credit but also ensuring that this credit is of good quality, safeguarding the financial health of businesses and the economy at large.

Tags: Sanjiv Bajaj, financial services, India economy, debt Market, insurance, pension funds, MSME credit access, capital markets, CII event, financial innovation

1. What does it mean to fund long-term projects through the debt Market?
   Funding long-term projects through the debt Market means borrowing money by issuing bonds or other securities. This money is then used to pay for big projects that take a long time to complete.

2. Why does Sanjiv Bajaj think debt markets are important for long-term projects?
   Sanjiv Bajaj believes debt markets are crucial because they provide companies and governments with the funds they need to invest in long-term projects, which can help grow the economy.

3. What are some examples of long-term projects?
   Examples of long-term projects include building highways, bridges, airports, and renewable energy plants. These projects take several years to finish and need significant funding.

4. How does borrowing from the debt Market work?
   When a company or government borrows from the debt Market, they issue bonds. Investors buy these bonds, lending money in exchange for regular interest payments and the return of the original amount after a set time.

5. What are the benefits of using the debt Market for funding?
   The benefits include lower interest rates compared to other forms of borrowing, access to large amounts of capital, and the ability to spread payments over a long period, making it easier to manage finances.