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Financial Services in India

January, 2013

Brief Overview

Indian financial markets, broadly comprising of segments like asset management, banking, insurance, foreign direct investments (FDI) and foreign institutional investors (FII), effectively promote the savings of the economy by directing them towards suitable investment options. The Indian financial sector is well developed, competitive and integrated to face all traumas (like the recent financial turmoil).

World Economic Forum’s latest report ‘Financial Development Report 2012’ has named India as the world's top-ranked country in terms of life insurance density. Life insurance density is the ratio of direct domestic premiums for life insurance to per capita gross domestic product (GDP) of a country. India has been ranked 40th in terms of overall financial development of a country, but is much ahead of larger economies like the US, UK, Japan and China for life insurance density.

Insurance Sector

Premium collection by general insurance companies increased by 24.7 per cent year-on-year (y-o-y) in September 2012 at Rs 6, 059.02 crore (US$ 1.1 billion), according to the data compiled by the sector regulator Insurance Regulatory and Development Authority (IRDA). The total premium stood at Rs 34,001.09 crore (US$ 6.32 billion) for April-September 2012.

In terms of premium collections for life insurance segment, private players collected Rs 7, 095 crore (US$ 1.32 billion) in April-September 2012 period while state-owned Life Insurance Corp of India (LIC) recorded a remarkable 24 per cent y-o-y growth in premium collections at Rs 15, 532.7 crore (US$ 2.88 billion) during the period. LIC’s support helped the industry post a 15 per cent y-o-y growth in premium collected in the first half of 2012-13.

Banking Services

Key recent statistics pertaining to the Indian banking industry are discussed below:

  • According to the Reserve Bank of India (RBI)’s ‘Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks’, March 2012, Nationalised Banks accounted for 53.0 per cent of the aggregate deposits, while the 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 13.0 per cent, 4.8 per cent, 4.4 per cent and 3.0 per cent, respectively.
    Nationalised Banks accounted for the highest share of 52.0 per cent in gross bank credit followed by State Bank of India and its Associates (22.5 per cent) and New Private Sector Banks (13.5 per cent). Foreign Banks, Old Private Sector Banks and Regional Rural Banks had shares of around 4.8 per cent, 4.8 per cent and 2.4 per cent, respectively.
  • Another statement issued by the RBI revealed that foreign exchange reserves stood at, US$ 294.99 billion for the week ended January 4, 2013 wherein the value of gold reserves was recorded at US$ 27.21 billion and that of foreign currency assets (FCAs) was at US$ 261.06 billion.
    The value of special drawing rights (SDRs) was US$ 4.40 billion and the country’s reserve position with the IMF was at US$ 2.30 billion.

Mutual Funds Industry in India

Indian mutual funds' average assets under management (AUM) increased by 5.3 per cent or Rs 392 billion (US$ 7.39 billion) to Rs 7.87 trillion (US$ 146.31 billion) in the October-December 2012 quarter from Rs 7.47 trillion (US$ 139 billion) in the previous quarter, as per the latest data released by the Association of Mutual Funds in India (AMFI). The growth in assets was majorly driven by inflows into income and gilt funds.

Further, assets recorded a stupendous growth rate of 15 per cent or Rs 1.05 trillion (US$ 19.52 billion) in the calendar year 2012 as against 1 per cent growth in 2011.