INDIA ENTERS 2026 at a moment when national ambition and institutional preparedness must rise together. The idea of Viksit Bharat has travelled a long distance over the past decade. It has moved beyond aspiration and become an expectation, one that will ultimately depend on the strength and maturity of the country’s financial system. Nations do not reach developed status through economic expansion alone. They do so when their financial institutions are capable of supporting opportunity, absorbing risk and allocating capital with confidence.

The past year offered a clearer window into this reality. India’s economic resilience in 2025 did not stand on its own; it reflected a financial ecosystem becoming increasingly aware of its role in shaping long-term prosperity. Global capital continues to respond to India’s direction with conviction, reinforced by a predictable policy environment and a visible effort to strengthen institutional foundations. Responsible capital deepens credibility and enhances the financial sector’s ability to support national ambition.

A parallel shift has taken root in governance. Trust has become the primary measure of institutional strength. Institutions that strengthened oversight, maintained transparency, and demonstrated steady leadership earned greater confidence from households, businesses, and investors. Governance is no longer viewed as compliance; it has become an expectation that shapes stability.

As India’s economic scale expands, financial institutions must operate with full-spectrum capability. Around the world, developed economies are supported by institutions that integrate banking, credit, insurance, market intermediation and long-term savings. These functions reinforce one another. India is beginning to recognise the need for financial platforms that meet customers at every stage of their financial journey.

A financial system aligned with a nation on the rise

India’s progress towards developed-nation status will depend significantly on how effectively its financial architecture adapts. Encouragingly, policy efforts over recent years point to a steady and forward-looking reform direction. Ownership frameworks have become more flexible, long-term capital participation has expanded, financial markets have opened to greater transparency and risk frameworks have been strengthened. The underlying intent is clear: to prepare the financial ecosystem for the responsibilities of a much larger economy.

These reforms have created a more supportive environment for institutional strengthening. Processes have become faster, capital flows have broadened, consumer protections have improved, and the market ecosystem has grown more accessible. These shifts matter because they reflect a regulatory philosophy that encourages innovation while safeguarding stability. This alignment across the financial oversight landscape has been one of India’s quiet but powerful advantages.

A deeper and more inclusive credit ecosystem will play an essential role. India’s credit-to-GDP ratio remains below global benchmarks, offering considerable scope for expansion. Broader credit access supported by better data, more refined risk models and diversified product structures will influence the pace of job creation and enterprise growth. It will also accelerate formal participation across the economy.

MSMEs and entrepreneurs will be central to this credit expansion. Their need for timely, cash-flow-aligned capital is pushing institutions to move beyond episodic lending towards more consistent and data-led financing. As access improves, small enterprises can scale with greater confidence, strengthening employment and domestic value chains.

Capital markets are expected to take on greater responsibility in financing national priorities. Rising domestic participation, coupled with sustained institutional flows, is strengthening India’s capacity to fund long-term projects in infrastructure, manufacturing, and digital sectors. A deeper market ecosystem not only mobilises capital but also provides households with more stable avenues for savings and wealth creation.

Trust, however, remains the cornerstone of progress. A financial system advances when citizens believe their savings are safe, when enterprises rely on predictable access to capital, and when investors see consistent and ethical market behaviour. Trust grows through transparency, steady governance and long-term commitment.

2026 is the year to consolidate institutional strength

The year ahead offers India an important opportunity to reinforce the institutional structures that will define financial capability over the next decade. A financial system that can support a developed economy must be designed with intention. It requires institutions that have scale, comprehensive product capability, and governance standards that mirror global best practices.

The direction is becoming clearer. Integrated financial platforms that bring together lending, insurance, investment, pensions and savings are becoming increasingly relevant. Institutions with stronger capital positions will be better placed to support long-tenor, high-impact sectors of the economy. Technology — already central to India’s financial evolution — will continue to transform risk assessment, operations and customer engagement. India’s digital financial infrastructure is becoming a core institutional asset. Innovations such as UPI Lite and the pilot-stage CBDC framework highlight the potential to enhance transaction efficiency, settlement certainty, and transparency at scale. Thoughtful consolidation, where it strengthens governance and resilience, will contribute to a more robust institutional landscape.

A nation transitions to developed status when its institutions possess the strength to carry its aspirations. India stands at the threshold of a decade that will determine its economic and social trajectory. The financial sector will play a decisive role in shaping the pace, quality, and inclusiveness of that journey.

The strength of India’s future will reflect the strength of the institutions built today.

(The author is Chairman, IIHL (IndusInd International Holdings Ltd), Mauritius. Views are personal.)