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At a broad level, the survey’s positive assessment of growth, inflation control, and balance-sheet health gives the financial sector room to expand. But it quickly tempers this optimism by pointing to a structural reality: India still relies on foreign capital to fund investment and imports. By linking the cost of capital to external imbalances rather than just policy rates, the survey quietly resets expectations for the sector. Even in an easing cycle, long-term capital will not become cheap overnight. For financial institutions, this means lending, especially to infrastructure, manufacturing, and MSMEs, will continue to carry a structural risk premium through credit enhancement measures such as refinance programmes with sectoral focus.
As a result, growth will increasingly depend on smarter structuring guarantees, co-lending, blended finance, and better risk sharing rather than simple balance-sheet expansion
This macro framing flows directly into the survey’s discussion on monetary management and financial intermediation. While accommodative liquidity conditions and past rate cuts have improved credit flow, the survey highlights that financial stability will increasingly rely on prudential discipline rather than headline policy easing. For banks and NBFCs, this signals a shift away from aggressive loan growth towards more disciplined underwriting. Asset quality, stress testing, and provisioning are no longer defensive tools but competitive advantages and the need of the hour. Institutions that price risk well and manage cycles better will be the ones that grow sustainably.
External sector vulnerabilities provide the next layer of impact. The survey notes that despite strong services exports and remittance inflows, India’s inability to generate sustained merchandise trade surpluses keeps the rupee vulnerable during periods of global risk aversion. For the financial services sector, this translates into heightened foreign exchange risk, episodic capital flow volatility, and the need for robust asset-liability management. Banks and asset managers are therefore pushed to deepen hedging markets, expand foreign currency financing solutions, and strengthen offshore financial intermediation, particularly through platforms such as GIFT City, which the survey highlights as a strategic interface with global capital.
It also stresses global uncertainty like geopolitics, trade fragmentation, and volatile capital flows. Even with strong domestic fundamentals, the rupee and financial markets remain exposed to shifts in global risk appetite, resulting in higher foreign exchange risk and more volatile capital flow. It also explains the push toward strengthening domestic financial capacity so that India relies less on unpredictable foreign inflows and more on stable domestic savings. This is where capital markets, insurance, and pensions come into sharper focus.
The survey implicitly assigns domestic institutional investors a bigger role in stabilising markets and funding long-term growth. For AMCs, insurers, and pension funds, this means deeper responsibility in channeling household savings into productive assets, infrastructure, and long-duration investments. The expansion of long-term savings and insurance is no longer just about inclusion; it is about financial stability now.
The annual report’s emphasis on a more calibrated, trust-based regulatory approach signals that financial institutions will be given more operational flexibility but also more accountability. This raises the stakes around data quality, compliance systems, and internal controls, pushing institutions to invest more seriously in RegTech and automated supervision tools.
Technology ties all these threads together. By treating Digital Public Infrastructure as the foundational economic plumbing, the survey reinforces its central role in financial services from payments and credit to data sharing and customer onboarding. At the same time, its caution around AI-driven risks sends a clear signal that innovation is encouraged, but it must be explainable, secure, and well-governed. Financial institutions that use AI to improve efficiency, reduce fraud, and expand access will gain an edge, but only if they can manage the accompanying operational and regulatory risks.
Taken together, the survey paints a clear picture of what is expected from the financial services sector going forward. It is no longer enough to grow credit, assets, or market share. Financial institutions are expected to allocate capital efficiently, manage volatility, and support long-term national priorities. Those that can balance growth with resilience without relying on regulatory forbearance or short-term capital will define the next phase of India’s financial sector. Now, we look forward to the Union Budget to capture all these priorities.
This article first appeared in the Fortune India on 29 January 2026.
