Noida, June 3 (APAC Media): India’s banking sector is entering a strong growth phase, underpinned by robust fundamentals, rising credit demand, and a rapidly expanding digital payments ecosystem.
In an exclusive interview, Vasanth Jeyapaul, CEO, CAMSPay, explains to Ketan Ram Kataria, Correspondent, APAC Media, how the banking sector is benefiting from gross non-performing assets (NPAs) at a 15-year low and healthy capital buffers, with credit growth projected to reach 15.9% in FY26.
However, he reminded that success will depend on building “fast, fair, and resilient” systems rather than scale alone.
With interest rates, inflation and global economic uncertainties continuing to influence financial markets, what do you see as the key risks confronting India’s banking sector today?
India’s banking sector is moving into a period of economic uncertainty from a position of strength, underpinned by a marked improvement in asset quality.
Gross non-performing assets have declined to 2.15% from over 11% in FY18, while net NPAs have eased to 0.5%, reflecting healthier balance sheets and improved credit discipline.
However, the banks now must balance growth with prudence amid emerging risks. Stress in unsecured retail lending, pressure on net interest margins, and rising cybersecurity and operational risks due to rapid digitisation are the key concerns now.
He added that technology resilience is now as critical as credit quality.
What changes are banks making to their credit, risk and capital allocation strategies to navigate current market challenges and remain resilient?
India’s banking sector is increasingly adopting data-driven and technology-led strategies to strengthen resilience and support sustainable growth.
There has been a shift from traditional credit appraisal models based on historical financial statements and repayment records to real-time transaction data, cash-flow analytics and AI-powered underwriting, particularly in MSME and retail lending.
Banks are also moving from periodic compliance checks to continuous risk monitoring, supported by advanced fraud detection and real-time anomaly systems.
The banking sector remains well-capitalised with capital adequacy ratios above regulatory norms. Credit growth has moderated but remains healthy, reflecting normalised demand and disciplined expansion.
Where do you see the biggest growth opportunities for banks—retail, corporate, or digital banking? And why?
Digital banking has become the foundation of modern banking rather than a standalone segment.
Retail banking is likely to drive the strongest growth, supported by greater financial inclusion, economic formalisation, and the rapid adoption of digital payments. The success of UPI has expanded access to formal financial services and increased demand for credit and other banking products.
Corporate banking is also well-positioned for growth, driven by infrastructure development, PLI-led manufacturing investments, and rising capital expenditure in renewable energy, logistics, and data centres.
Ultimately, banks that deliver seamless, end-to-end digital customer experiences will emerge as market leaders.
How critical will technology and AI be in driving both operational efficiency and trust in the banking sector in the coming years?
Technology has evolved from being a cost-efficiency tool to becoming a key driver of growth and trust in India’s banking sector. Artificial intelligence is delivering significant benefits in fraud detection, credit underwriting, operational efficiency, and customer personalisation.
At the same time, real-time analytics and alternative data are improving risk assessment and expanding financial inclusion.
However, technology alone cannot create trust; it must be supported by strong security, transparency, and regulatory compliance. In this context, explainable AI and robust governance frameworks are essential. India’s digital payments ecosystem demonstrates how innovation can scale successfully while maintaining customer trust and reliability.
Which strategic shifts will define banking priorities over the next 3–5 years in terms of stability, credit growth and digital transformation?
Looking ahead, I believe five strategic priorities will be critical in shaping banks’ resilience and driving sustainable growth.
Firstly, strengthening deposit franchises will be critical as credit growth outpaces deposit mobilisation, intensifying competition for low-cost funds.
Second, banks must build advanced risk infrastructure using AI-driven tools for fraud detection, real-time monitoring and predictive credit assessment.
Third, financial inclusion must scale further by leveraging digital rails like UPI, Aadhaar and Jan Dhan to expand credit access.
Fourth, banks need to develop integrated financial ecosystems combining credit, investments and insurance.
How can India’s banking system support credit growth among young consumers while preventing over-leveraging and protecting credit scores?
The goal should not be to restrict young people’s access to credit but to ensure it is accompanied by financial literacy and responsible borrowing habits.
Greater credit availability has enabled higher consumption, economic participation and the creation of financial identities among young Indians.
However, rising stress in unsecured retail lending, particularly among first-time borrowers, underscores the need for safeguards.
I would recommend three key interventions:
- Mandatory credit education at loan issuance: Ensure borrowers receive clear, standardized education about credit terms, responsibilities, and consequences at the time of taking a loan.
- Awareness of CIBIL scores as financial assets: Promote understanding that CIBIL scores are long-term financial indicators that affect future borrowing ability and financial opportunities.
- AI-driven early warning systems: Use artificial intelligence tools to detect early signs of financial distress and enable timely intervention to prevent defaults and protect borrowers’ financial stability.
CLOSING PERSPECTIVE
India’s banking sector is entering a new growth phase, supported by strong fundamentals including gross NPAs at a 15-year low, robust capital adequacy, and credit growth expected at 15.9% in FY26. Digital payments infrastructure continues to scale rapidly, processing over 24,000 crore transactions annually.
Disclaimer: Views expressed are those of experts and do not reflect APAC Media. This is for informational purposes only, not financial advice. We are not responsible for investment decisions. Please consult a qualified financial advisor before investing.
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