Despite digitisation, India will need more banks: DFS secy M Nagaraju

India will require more banks to meet the country’s growing credit and inclusion needs as it moves toward becoming a developed economy by 2047, the Department of Financial Services (DFS) Secretary M Nagaraju said on Thursday.

 

Speaking at the SBI conclave event, he said that even with rapid digitisation, the demand for banking services will expand significantly. “Imagine the prevailing $32.9 billion economy by 2047, think of the number of bankers and institutions we will need. While most transactions will be digital, we will still require new banks that meet the needs of different industries, regions, and population segments,” he said.

 

He noted that India could explore multiple routes to expand its banking ecosystem, including allowing some non-banking financial companies (NBFCs) and small finance banks to transition into universal banks. He said that digital-only banks could also play a significant role in reaching underserved markets, especially as large lenders like SBI increasingly provide end-to-end services online.

 

However, Nagaraju cautioned that the digital transition must be carefully managed to ensure that service quality and customer trust are not compromised. He added that higher credit flow to agriculture, MSMEs, and education remains central to achieving inclusive growth. “Every child admitted to a college should be able to get financing for education. That is how we build an aspirational, high-standard society,” he said, adding that sustained credit growth in these sectors is vital to lift more households into the middle class.

 

The DFS secretary noted that public-sector banks (PSBs) have improved significantly in their performance, with several lenders now posting return ratios and profitability indicators that compare well globally. “Some banks are reaching 10 per cent return levels, which reflects our commitment to making Indian banks among the best in the world,” he said.

 

Nagaraju pointed out that bad-loan ratios have continued to decline, with non-performing assets (NPAs) in public sector banks dropping steadily since 2018. He credited the Insolvency and Bankruptcy Code (IBC) for instilling a culture of timely resolution. “The success of IBC reflects the willingness of banks to engage constructively with debtors, recover dues quickly, and build a strong credit culture,” he said.

 

On financial inclusion, Nagaraju said the government’s ongoing campaigns have brought a large section of the population into the formal financial system. “About 56 per cent of accounts were covered in our last inclusion campaign, and we continue to work toward bringing another 3.5 crore people into the fold,” he said.

 

He highlighted the need to expand pension and insurance coverage, particularly for non-government employees and informal-sector workers. “Large numbers of Indians still lack pension or risk coverage. Pension savings are not just social security, they can nourish the economy when channelled into productive investments,” he added.