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Financial Services in India

October, 2012

Brief Overview

Industry segments such as broking, insurance, banking, mutual funds and investment management form the entire canvas of the Indian financial services industry. While the insurance sector is believed to be growing at an annual pace of 32-34 per cent, Indian banking sector is poised to become the world’s third largest in asset size by 2025. Further, remaining substantially bullish on Indian markets, foreign institutional investors (FIIs) invested over US$ 13 billion into Indian stocks so far in 2012.

Some of recent developments pertaining to various financial services are as follows:

Insurance Sector

The US$ 41 billion-insurance industry has 24 life insurers and 27 general insurers.

The first year premium of the life insurance companies grew by 1.4 per cent in April-May 2012 wherein the first year premium, combined of the public and private sector insurers, for April-May 2012 stood at Rs 12,428.83 crore (US$ 2.35 billion), up from Rs 12,253.44 crore (US$ 2.32 billion) during the same period a year ago, according to the recent data released by the sector regulator, Insurance Regulatory and Development Authority (IRDA).

The gross premium of non-life insurance companies during April-May 2012 expanded by 18.27 per cent to Rs 11,387.32 crore (US$ 2.16 billion) from Rs 9,627.91 crore (US$ 1.82 billion) during the corresponding period in 2011.

Banking Services

Some of the key recent statistics pertaining to the Indian banking industry are:

  • According to the Reserve Bank of India (RBI)’s ‘Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks’, December 2011, Nationalised Banks, as a group, accounted for 52.1 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.9 per cent. The share of New Private Sector Banks, Old Private Sector Banks, Foreign Banks, and Regional Rural Banks in aggregate deposits was 13.9 per cent, .8 per cent, 4.5 per cent and 2.9 per cent, respectively
    Regarding gross bank credit also, Nationalised Banks held the highest share of 51.2 per cent in the total bank credit followed by SBI and its associates at 22.5 per cent and New Private Sector Banks at 13.8 per cent. Foreign Banks, Old Private Sector Banks and Regional Rural Banks had relatively lower shares in the total bank credit at 5.2 per cent, 4.8 per cent and 2.5 per cent, respectively
  • Another statement released by RBI revealed that banks' advances grew to US$ 913 billion in July-September 2012. The RBI projects credit growth at 17 per cent and deposit growth at 16 per cent in 2012-13
  • Foreign exchange reserves stood at US$ 294.81 billion for the week ended September 28, 2012 wherein the value of gold reserves was recorded at US$ 28.133 billion and that of foreign currency assets (FCAs) was at US$ 259.96 billion

Mutual Funds

The Rs 6.70 trillion (US$ 126.89 billion) Indian mutual funds (MF) industry has 44 asset management companies (AMCs). The fund houses registered average assets under management (AAUM) at Rs 7,53,703 crore (US$ 142.74 billion) in the second quarter of 2012-13 wherein they added assets worth Rs 54,681 crore (US$ 10.36 billion) marking an increase of 8 per cent, according to recent data released by the Association of Mutual Funds in India (AMFI).