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Indian Financial Services Industry Analysis

January, 2020

The country’s financial services sector consists of the capital markets, insurance sector and non-banking financial companies (NBFCs). India’s gross national savings (GDS) as a percentage of Gross Domestic Product (GDP) stood at 30.50 per cent in 2019. The total amount of Initial Public Offerings increased to Rs 84,357 crore (US$ 13,089 million) by the end of FY18. In financial year 2019, total funds raised stood at Rs 19,900 crore (US$ 2.85 billion). Ultra-High Net Worth Individual (UHNWI) increased to 2,697 in 2018 and the population of UHNWI has grew by 118 per cent from 2013 to 2018. The number of HNWIs in India reached 256,000 by the end of 2018.

India has scored a perfect 10 in protecting shareholders' rights on the back of reforms implemented by Securities and Exchange Board of India (SEBI) in World Bank's Ease of Doing Business 2020 report.

The asset management industry in India is among the fastest growing in the world. In March 2019, corporate investors Assets Under Management AUM stood at Rs 9,54,627.51 crore (US$ 136.59 billion), while HNWIs and retail investors reached Rs 7,51,666.95 crore (US$ 107.55 billion) and Rs 6,29,848.68 crore (US$ 90.12 billion), respectively. In the Asia-Pacific, India is among the top five countries in terms of HNWIs. The value of alternative investment funds rose from Rs 13,776 crore (US$ 1.97 billion) in June 2016 to Rs 74,817 crore (US$ 10.70 billion) in June 2019.

The MF industry’s Assets Under Management (AUM) has grown from Rs 10.96 trillion (US$ 156.82 billion) in October 2014 to Rs 26.94 trillion (US$ 385.52 billion) in November 2019. In FY19, equity mutual funds have registered a record net inflow of Rs 990.87 billion (US$ 14.18 billion).

Total equity funding's of microfinance sector grew at the rate of 39.88 to Rs 9,631 crore (Rs 4.49 billion) in 2017-18 from Rs 6,885 crore (US$ 1.03 billion) in 2016-17. The public deposit of NBFCs increased from Rs 40,955.54 crore (US$ 5.86 billion) in FY09 to Rs 31,905 crore (US$ 4.95 billion) in FY18, registering a compound annual growth rate (CAGR) of 36.86 per cent.  The equity mutual funds registered a net inflow of Rs 6,489 crore in September 2019.

In November 2018, Bombay Stock Exchange (BSE) has enabled offering live status of applications filed by listed companies on its online portal and introduced weekly futures and options contracts on Sensex 50 index from October 26, 2018. The Government of India is planning to launch a global exchange traded fund (ETF) in FY20 to raise long term investments from overseas pension funds.

The Government of India has taken various steps to deepen the reforms in the capital markets, including simplification of the Initial Public Offer (IPO) process which allows qualified foreign investors (QFIs) to access the Indian bond markets. In 2018, Rs 30,959 crore (US$ 4.43 billion) were raised from initial public offerings (IPOs) whereas Rs 10,300 crore (US$ 1.47 billion) have been raised in H1 2019.

As per Union Budget 2019-20, 100 per cent foreign direct investment (FDI) will be permitted for insurance intermediaries. The insurance sector could be opened to 74 per cent FDI from 49 per cent.

Government has approved 100 per cent FDI for insurance intermediaries.

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