The financial sector has a bright future and a lot of room to grow, but the financial sector is not yet well-equipped to handle a number of challenges, chief financial officer Arvind Subramanian said here on Friday.
Addressing the third annual Global Financial Leadership Summit, which is expected to be held here on December 15-17, Subramanican said there are about 1,700 banks in the country, which has a population of nearly 2.7 billion.
The country has about 500 financial institutions and has nearly 500,000 customers, according to the Ministry of Corporate Affairs and Finance (MCFA).
The country has more than 2,200 registered insurance companies and about 200,000 businesses, including 1,600 companies with over 2 lakh employees.
With this in mind, the country needs to make a number from the financial industry of building up more of these institutions, Subaramanian said.
The number of financial institutions should increase by 10 times, he said.
There are some hurdles.
Some of them are the capital requirements, Subaranaan said, adding that it is a challenge to invest in a new institution that is more than two years old.
The other hurdle is the lack of financial literacy.
The average age of a financial institution is about 50 years.
The rate of turnover is about 40% of what it should be, Subamanian said, while adding that the financial literacy gap has widened over the last five years.
The financial literacy problem is a big challenge for the financial services sector, he added.
The financial literacy in the sector is at around 65% of the average.
The MCFA has recently set a target of increasing the financial education of financial intermediaries by about 40%.
The MC FA is also planning to set up an electronic banking facility, called the India Banking Technology Initiative, in the near future.
The government has set up a pilot project to build a digital financial institution in Delhi and Hyderabad and is also working on establishing a digital bank.
The ministry of commerce has also set a deadline of January 2020 for the completion of the financial inclusion drive.
The drive aims to ensure that the country can become an economy where there is enough financial inclusion and access to capital.
(With inputs from PTI)