M Nagaraju, Secretary, Department of Financial Services, Ministry of Finance on Thursday said the distinction between traditional finance and fintech is increasingly blurred.
Previously seen as distinct silos, both are evolving into complementary forces, working together to integrate advancements into the economic system sustainably, he said.
“The difference between fintech and finance is diminishing over time, and both must complement each other,” said M Nagaraju.
The Secretary was delivering the keynote at FIBAC 2024 organised jointly by FICCI, and IBA on the theme ‘Banking for Viksit Bharat’.
“All of us are aware that India’s robust banking system is getting ready to meet the needs of Viksit Bharat,” he said.
Addressing cybersecurity threats and reaching the last mile of the country requires leveraging fintech innovations, he highlighted that Digital Public Infrastructure (DPI) serves as the backbone of India’s financial ecosystem, with the India Stack representing a remarkable success story.
“Just as advanced economies have integrated large sections of their populations into the financial system through robust DPIs, initiatives like ULI and UPI exemplify India’s progress in this area”, Secretary, DFS elaborated.
Role of Banks
Speaking on the vital role of banks, Nagaraju said, “Banks account for 64% of the Indian financial sector and they play a crucial role in advancing the agenda of inclusive growth, particularly in reaching underserved segments of the population.”
The government’s ambition to propel India towards a $30 trillion economy by 2047 is a cornerstone of its economic strategy. “The PMJDY, including the JAM trinity, has played an important role, also the increase in bank account ownership from 35% to 80% over the past decade propelled by the scheme,” Nagaraju said.
He further lauded the impact of programmes such as PMKVY for skill development, PM Vishwakarma Yojana for artisans, and Stand Up India, which aim to ensure regular income and support for various segments of society, also highlighting the contribution of Banks to 25% of capex.
However, Nagaraju also cautioned about the risks associated with rapid digitalisation. “Banks need to be careful of cyber threats, mitigate operational risks, and build portfolios accordingly.”
He stressed the importance of the Reserve Bank of India (RBI) in exploring green financing and integrating Environmental, Social, and Governance (ESG) criteria into financial practices.
Reflecting on the evolution of the financial sector since its liberalisation in 1991, Nagaraju discussed the sector’s impressive growth. “The brick-and-mortar structure we have created is tremendous, The transition to digital platforms has connected a vast number of people, aligning with the ambitious goals for 2047,” he said.
Looking ahead, Nagaraju emphasised the need to build robust credit risk assessment systems and infrastructure to meet future demands. “We need to build systems and innovations to ensure adequate capital for future generations, With 40% of MSMEs integrated into the formal financial system, the potential impact of increasing this number to 80% could be transformative, as seen in countries like Taiwan and South Korea,” the Secretary to Ministry of Finance highlighted.
Educating the startup ecosystem and inspiring the younger generation to dream big are also crucial, according to Nagaraju.
