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Financial Services: March 2013

March, 2013

Indian gross national savings stood at US$ 569 billion in 2011 and are expected to touch US$ 1,413 billion mark by 2017. The asset management industry in India is among the fastest-growing in the world. Total asset under management (AUM) of the mutual fund industry have clocked a compound annual growth rate (CAGR) of 15.6 per cent over the period FY07-12 to reach US$ 138 billion.

Over 90 per cent of household savings are invested in bank deposits and only 10 per cent in other financial asset classes. Innovative and customised products are expected to shift bank deposits to these asset classes. The quantum of savings that Indians are making is set to present immense opportunities for financial intermediaries to move savings to more productive channels.

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

The Government of India has taken various steps for deepening the reforms in the capital markets, including simplification of initial public offering (IPO) process and allowing qualified foreign investors (QFIs) to access the Indian bond markets.

Non-banking financial companies (NBFC) are rapidly gaining prominence as intermediaries in the retail finance space. More than 80 per cent of equipment leasing and hire purchase activity in India is financed by NBFCs. The AUM of NBFCs in retail finance is expected to double over the period 2010-13. Future growth will be driven by new products like gold loans which is expected to expand at a CAGR of 40-50 per cent over 2011-2013.

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