1. Context and Thesis

• India’s financial sector is at an inflection point, with persistent frictions despite ongoing reforms in:
  
  
  • Banking
    
    
  • Financial services
    
    
  • Insurance (BFSI)
    
    
• These frictions discourage investment, delay growth, and deter savers.
  
  
• A truly transparent and investor-friendly financial system is urgently needed.
  
  

2. Problems in Nomination & Legal Framework

• Nomination rules across financial products (banks, mutual funds, insurance) are inconsistent and confusing.
  
  
• Citizens face issues such as:
  
  
  • Naming multiple nominees with differing rules.
    
    
  • Legal ambiguities that cause delays in claims.
    
    
  • Exploitation by those misusing loopholes.
    
    
• Need: Harmonised nomination rules and legal clarity across BFSI.
  
  

3. Corporate Bond Market Deficiency

• India’s corporate bond market is underdeveloped.
  
  
• Despite RBI’s mandate to develop a secondary bond market:
  
  
  • Progress has been inadequate.
    
    
  • High costs of capital remain a hurdle for business viability.
    
    
  • Better bond markets can reduce funding costs by 2–3%, boosting jobs and investments.
    
    
• Issue: Regulatory opacity and fragmented policies deter growth.
  
  

4. Inadequate UBO (Ultimate Beneficial Owner) Disclosures

• Reforms on UBO transparency are weak:
  
  
  • Mauritius-based funds not disclosing granular ownership details.
    
    
  • SEBI’s updated UBO guidelines (10% shareholding or 15% in passive funds) still leave gaps.
    
    
  • Need better identification of real beneficial owners, especially to prevent money laundering and tax evasion.
    
    

5. Gaps in Retirement Planning Instruments

• India’s retirement ecosystem is complex, opaque, and intermediated:
  
  
  • Private insurance and pension funds impose high charges.
    
    
  • Zero-coupon government securities (long-dated) offer a cheaper, transparent
    
    
• Government and RBI have not utilized this potential despite technological feasibility.
  
  
• Missed opportunity to create a strong sovereign-backed pension framework.
  
  

6. Shadow Banking: The Biggest Threat

• Non-Banking Financial Companies (NBFCs), brokers, peer-to-peer lenders etc. offer bank-like services without stringent oversight.
  
  
• Investors unknowingly pay exorbitant interest rates (often 20%+).
  
  
• Brokers misuse investors’ funds as collateral and lend at high rates – classic shadow banking.
  
  
• Lack of data and oversight worsens the threat.
  
  
• Warning: Potential for financial crisis similar to 2008 (US mortgage crisis).
  
  

7. Lessons from Global Practices

• European Union is building regulations and data transparency in shadow banking.
  
  
• India needs:
  
  
  • Forward-looking regulation
    
    
  • Cross-vertical harmonisation
    
    
  • Stronger enforcement of transparency and disclosure
    
    

8. Conclusion: Call for Strategic Overhaul

• Cosmetic changes won’t suffice.
  
  
• A holistic roadmap is essential to:
  
  
  • Harmonise rules across BFSI.
    
    
  • Fix nomination processes.
    
    
  • Develop bond markets.
    
    
  • Build transparent retirement solutions.
    
    

Address the shadow banking threat seriously.