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Financial Services

April, 2012


The Indian financial services industry has a lot of scope for further penetration, and thus has immense scope and potential to grow exponentially. The online genre, mobile explosion, emergence of social media platforms, technologies like cloud computing and increasing pace of convergence and interconnectivity of devices are intensely driving the growth of this industry. These are playing pivotal roles in transforming the way financial services are delivered to the end-consumer. Further, financial institutions are revamping their operational infrastructure and business delivery models.

Financial services industry mainly comprises the BFSI industry, that is, banking, financial services (such as mutual funds) and insurance. Key developments and performance pointers pertaining to each of these sub-segments are discussed in this overview.

Insurance Sector

There are 24 life insurers in India with about Rs 15 trillion (US$ 292.5 billion) in assets.

According to data released by the Insurance Regulatory and Development Authority (IRDA), the life insurance industry collected Rs 89,655.83 crore (US$ 17.5 billion) during April 2011-February 2012 by writing new policies while the insurers sold about 35.12 million policies collectively. Private players sold seven million policies.

The general insurance industry continued with its growth trajectory as the gross written premium grew 24.03 per cent during 2011-12 against the year-ago period.

Banking Services

According to the world's largest rating agency, Standard & Poor (S&P)'s Ratings Services, India's banking system has a high level of stable, core customer deposits supported by the system's good franchise, extensive branch networks, and large, yet growing, domestic savings.

  • According to the Reserve Bank of India (RBI)'s 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks', September 2011, Nationalised Banks, as a group, accounted for 52.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.8 per cent. The share of New private sector banks, Old private sector banks, Foreign banks and Regional Rural banks in aggregate deposits was 13.7 per cent, 4.8 per cent, 4.6 per cent and 2.9 per cent, respectively.
    With respect to gross bank credit also, nationalised banks hold the highest share of 51.6 per cent in the total bank credit, with SBI and its associates at 22.1 per cent and New Private sector banks at 13.8 per cent. Foreign banks, Old private sector banks and Regional Rural banks held relatively lower shares in the total bank credit with 5.2 per cent, 4.8 per cent and 2.5 per cent, respectively.
  • Another statement released by the RBI stated that bank deposits grew 13.4 per cent to Rs 60.72 trillion (US$ 1.18 trillion) in the fiscal 2011-12 (the year to March 23, 2011) while loans and advances grew 17.08 percent to Rs 47.54 trillion (US$ 927.16 billion).

Mutual Funds Industry in India

The Rs 6.70 trillion (US$ 130.66 billion) Indian mutual funds (MF) industry has 44 asset management companies (AMCs). Recent data released by the Association of Mutual Funds in India (AMFI) indicated that average assets under management (AUM) reported by these fund houses amounted to Rs 6,68,824 crore (US$ 130.33 billion) in 2011-12.

HDFC Mutual Fund maintained its top position as the country's biggest MF with an average AUM of Rs 89,879 crore (US$ 17.51 billion), followed by Reliance MF (Rs 78,112 crore [US$ 15.22 billion]), ICICI Prudential MF (Rs 68,718 crore [US$ 13.39 billion]), Birla Sunlife MF (Rs 61,143 crore [US$ 11.92 billion]) and UTI MF (Rs 58,922 crore [US$ 11.48 billion]).

Private Equity (PE) and Mergers & Acquisitions (M&A) in India

India Inc witnessed 202 merger and acquisition (M&A) deals worth US$ 9.4 billion during the first quarter of 2012. According to Ernst & Young (E&Y)'s latest transactions quarterly report, deals in January-March 2012 were 22 per cent higher than those of October-December 2011 quarter in terms of volume and 4.5 times higher in terms of value. Domestic deals dominated the M&A space as they accounted for 63 per cent of the total number of deals and contributed 88.4 per cent of the total disclosed deal value for the quarter.