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Indian Financial Services Industry Analysis

March, 2020

The country’s financial services sector consists of 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. In 2019, US$ 2.5 billion was raised across 17 initial public offerings (IPOs). The number of Ultra High Net Worth Individuals (UHNWI) are estimated to increase to 10,354 in 2024 from 5,986 in 2019.

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 the 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 9.55 lakh crore (US$ 136.59 billion), while HNWIs and retail investors reached Rs 7.52 lakh crore (US$ 107.55 billion) and Rs 6.30 lakh crore (US$ 90.12 billion), respectively. In the Asia-Pacific region, 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.

Mutual Fund industry’s AUM (asset under management) grew from Rs 10.96 trillion (US$ 156.82 billion) in October 2014 to Rs 24.54 trillion (US$ 348.24 billion) in May 2020. Inflow in India's mutual fund schemes via the Systematic Investment Plan (SIP) route reached Rs 82,453 crore (US$ 11.70 billion) in 2019. Equity mutual funds registered a net inflow of Rs 8.04 trillion (US$ 114.06 billion) by end of December 2019.

The Government of India has taken various steps to deepen reforms in the capital market, including simplification of the IPO process, which allows qualified foreign investors (QFIs) to access the Indian bond market. In 2019, investment in Indian equities by foreign portfolio investors (FPIs) touched five-year high of Rs 101,122 crore (US$ 14.47 billion). Investment by FPIs in India’s capital markets reached a net Rs 12.30 lakh crore (US$ 174.55 billion) between FY02-21 (till June 09, 2020).

The Government has also approved 100 per cent FDI for insurance intermediaries. The insurance sector could be opened to 74 per cent FDI from the existing 49 per cent.

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