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Financial Services: Nov 2012

November, 2012

Rising incomes are driving the demand for financial services across income brackets in India. Financial inclusion drive from Reserve Bank of India (RBI) has expanded the target market to semi-urban and rural areas.

New distribution channels like bancassurance, online distribution and NBFCs have widened the reach and reduced the operational costs. The life insurance sector has witnessed the launch of innovative products such as Unit Linked Insurance Plans (ULIPs). India's assets under management (AUM) has grown at 15.6 per cent compound annual growth rate (CAGR) over 2007-2012, and the total AUM stood at US$ 138 billion as of March 31, 2012. The Indian equity markets is expanding in terms of listed companies and market cap, widening the playing field for brokerage firms. Sophisticated products segment is growing rapidly, reflected in the steep rise in growth of derivatives trading. With the increasing retail penetration there is immense potential to tap the untapped market. Growing financial awareness is expected to increase the fraction of population participating in this market.

The size of Indian gross national savings stood at US$ 561 billion in 2011 and is expected to touch US$ 1,290 billion mark by 2017. Innovative and customised products are expected to shift bank deposits to these asset classes. Government has set up Financial Inclusion Fund and Inclusion Technology Fund to support financial inclusion.

Increasing use of technology to reach rural India is the paradigm-shifting enabler. Internet kiosk based channels are expected to become the bridge that connects rural India to financial services as credit, insurance and investments.

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