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Indian Financial Services Industry Analysis

September, 2019

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. IPO’s reached to Rs 13.55 crore (US$ 1.94 million) in FY19 (up to Feb 2019). 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 2,30,400 by the end of 2017.

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.

Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE) attained permission from the Securities and Exchange Board of India (SEBI), to launch commodity derivatives trading from October 1, 2018.

In FY19, equity mutual funds have registered a record net inflow of Rs 990.87 billion (US$ 14.18 billion). In August 2019, Mutual fund industry’s asset under management (AUM) stood at Rs 25.74 lakh crore (US$ 364.42 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.

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 FY19, Rs 14,674 crore (US$ 2.09 billion) has been raised from Initial Public Offerings (IPOs).

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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