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Financial Services in India

April, 2013

Financial Services in India- Brief Overview

Comprising primary markets, foreign direct investments (FDI), alternate investment options, banking, insurance and asset management segment, the Indian financial services market happens to be one of the oldest and robust across the globe. It is definitely fast growing and best among other emerging economies.

India is highly preferred as an investment destination as the savings rate is high (25 per cent plus) and financial products' penetration is low. Hence, it is a vast market for mutual funds, portfolio and wealth management services, insurance and a plethora of other financial products. Moreover, with a major pie of savings going into physical assets such as gold and real estate, the Indian Government is focussing on big policy initiatives to attract savers towards financial markets through incentives and tax savings. For instance, the recent relaxation in expense ratios for mutual funds and the prospects of higher foreign investment limits in insurance and pension sectors are certain steps that could unlock huge potential in these sectors and can emerge as a lucrative market for foreign investors.

Insurance Sector

  • Life insurance industry, comprising over 20 companies, including public sector Life Insurance Corporation (LIC) of India, collected total premium of Rs 84, 501.75 crore (US$ 15.48 billion) during the April-February period of 2012-13 fiscal. Private insurers together raked-in Rs 23, 796.29 crore (US$ 4.36 billion) in these 11 months
  • On the other hand, Indian general insurers' premium collection rose 19.36 per cent to Rs 561.1 billion (US$ 10.28 billion) in the April-January 2012-13, Insurance Regulatory and Development Authority (IRDA) said in a statement.

    Of the total, premium collection of the four state-run general insurers rose 16.78 per cent to Rs 319.18 billion (US$ 5.85 billion) in the 10 months while that of 23 private sector non-life insurers increased 22.93 per cent to Rs 241.81 billion (US$ 4.43 billion) to Jan 31, 2013.

    The four state-run general insurers are New India Assurance Co, National Insurance Co Ltd, Oriental Insurance Co Ltd and United India Insurance Co Ltd

Banking Services

  • 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
  • India's foreign exchange (forex) reserves stood at US$ 292.64 billion for the week ended March 29, 2013, according to data released by the central bank. The value of foreign currency assets (FCA) - the biggest component of the forex reserves - stood at US$ 259.72 billion, according to the weekly statistical supplement released by the RBI

Mutual Funds Industry in India

India's asset management companies (AMCs) have witnessed a growth of 19.5 per cent in their average assets under management (AUM) in FY13, wherein they stood at Rs 8.16 lakh crore (US$ 149.53 billion), as on March 31, 2013, according to the latest statistics available from industry body Association of Mutual Funds in India (AMFI)