India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The banking regulator has allowed new entities such as payment banks to be created recently, thereby adding to the type of entities operating in the sector. However, financial sector in India is predominantly a banking sector with commercial banks accounting for more than 64% of the total assets held by the financial system.
The Government of India has introduced several reforms to liberalise, regulate and enhance this industry. The Government and Reserve Bank of India (RBI) have taken various measures to facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs). These measures include launching Credit Guarantee Fund Scheme for MSMEs, issuing guideline to banks regarding collateral requirements and setting up a Micro Units Development and Refinance Agency (MUDRA). With a combined push by Government and private sector, India is undoubtedly one of the world's most vibrant capital markets.
As of November 2020, Assets Under Management (AUM) managed by the mutual fund industry stood at Rs. 30 lakh crore (US$ 407.39 billion). 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.
Another crucial component of India’s financial industry is the insurance industry. Insurance industry has been expanding at a fast pace. The total first year premium of life insurance companies reached Rs. 2.59 lakh crore (US$ 36.73 billion) in FY20.
Furthermore, India’s leading bourse, Bombay Stock Exchange (BSE), will set up a joint venture with Ebix Inc to build a robust insurance distribution network in the country through a new distribution exchange platform.
Note: Conversion rate used for December 2020 is Rs. 1 = US$ 0.014
References: Media Reports, Press Releases, IRDAI, General Insurance Council, Reserve Bank of India, Union Budget 2019 20
Notes - * - Private Equity Deal Tracker report by EY
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
In the FY2021-22 Union Budget, the Government of India announced an ambitious divestment target...
In March 2021, the Union Cabinet of India approved a memor...
The vehicle scrappage policy is a government-funded programme ...
The ‘Smart City Mission' is a revolutionary proj...
The handloom and handicraft industry has been the backbone of ...
The government’s objective to strengthen the healthcare ...