August 3, 2025

At a recent event organized by the Merchants' Chamber of Commerce & Industry (MCCI), N Kamakodi, the Managing Director and CEO of City Union Bank, highlighted the critical issue of risk capital in achieving India’s ambitious goal of becoming a USD 5 trillion economy. India, currently the fourth-largest economy in the world, faces significant challenges despite its capital resources due to its high population and low per capita income. Kamakodi pointed out that while the nation has adequate capital to support growth, what is truly lacking is adequate risk capital. This gap poses a major hindrance to economic expansion and the realization of long-term objectives. He encouraged entrepreneurs to take the lead in driving economic growth, while emphasizing the need for bankers to support these initiatives. He stated, "Entrepreneurs should lead and bankers should support," signifying the collaborative role that both sectors must play in fostering a robust economy. During the launch of the banking and finance helpdesk, Kamakodi drew comparisons with economies like Germany and the United States. Germany relies heavily on debt to fund its economy, while the U.S. utilizes equity as a primary source of funding. Kamakodi suggested that India should focus more on building its risk capital pool to successfully navigate towards its ambitious economic targets. In the context of banking strength, Sanatan Mishra, General Manager of State Bank of India (Network-II), echoed Kamakodi's sentiments. He praised the current position of Indian banks, stating that they are well-capitalized and ready to finance capital expenditures. The positive impact of the Unified Payments Interface (UPI) in enabling low-ticket transactions and promoting inclusive financial access was also highlighted. Mishra noted that UPI has become a game changer, enabling many more people to engage in financial systems. The supportive environment provided by banks is vital, but Mishra noted that the private sector needs to absorb the credit offered. This collaborative approach between the banking sector and entrepreneurs is essential in ensuring that the necessary funding is channeled effectively to support growth. The discussions held at MCCI reflect a growing recognition of the importance of fostering an ecosystem that supports entrepreneurs through financial mechanisms. The banking sector's potential to play a pivotal role, provided the environment for risk-taking is nurtured, was emphasized by both Kamakodi and Mishra. As India continues its journey towards becoming a USD 5 trillion economy, the importance of establishing a robust risk capital framework becomes crucial. This involves not only financial institutions but also policy measures that encourage investments in innovative ventures. Without a healthy infusion of risk capital, the entrepreneurial spirit that drives growth may struggle to realize its full potential. In conclusion, the insights shared by industry leaders at the MCCI highlight a significant challenge for India. While there is ample opportunity for growth, the shortcomings in risk capital must be addressed. Strengthening the partnership between banks and entrepreneurs, alongside innovative financial solutions, will be vital in achieving India's economic ambitions.

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Tags: India, Economy, Banking, Entrepreneurship, Risk capital,