India’s growing financing requirements cannot be met by banks alone, with infrastructure, manufacturing, urbanisation, energy transition, MSMEs and technology-driven businesses requiring different forms of capital, Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey said on Wednesday.
“Therefore, the question before us is not whether India’s growth should be financed by banks or markets. We need both. And we need both to be strong,” he said.
Banks have been central to India’s development and will continue to play an important role by assessing projects, providing credit, monitoring borrowers and building long-term relationships with businesses, Pandey said.
However, as the economy becomes larger and more sophisticated, its financing needs are also becoming more diverse. While some businesses require debt, others need risk capital, while infrastructure projects may require patient, long-duration funding. Young businesses may need equity before they become eligible for conventional debt, while large companies can diversify their borrowing between banks and bond markets.
“Banks and capital markets are not competing destinations. They are complementary parts of the same financing ecosystem,” he said.
The role of securities markets in this financing ecosystem has expanded significantly over the past decade, the official said, pointing to the growing importance of market-based financing alongside traditional bank credit.
India’s investment requirements are set to remain substantial as the country expands infrastructure and manufacturing capacity and undergoes rapid urbanisation and an energy transition. At the same time, financing needs span businesses of different sizes and maturity, from MSMEs and traditional enterprises to technology-driven companies.