Indian Financial Services Industry Analysis

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% 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 and is ranked 12^th on the list of countries with most such people.

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 number of HNWIs in India reached 263,000 by end of 2019. Between 2014 and 2019, number of HNWIs in India saw a steady rise, growing at a CAGR of 3.9%.

Mutual Fund (MF) industry’s Assets Under Management (AUM) grew from Rs. 10.96 lakh crore (US$ 156.82 billion) in October 2014 to Rs. 28.22 lakh crore (US$ 361.59 billion) in October 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.

16% assets of the mutual fund industry were generated from B30 locations in September 2020. Assets from B30 locations increased from Rs. 4.45 lakh crore (US$ 59.65 billion) in August 2020 to Rs. 4.47 lakh crore (US$ 60.77 billion) in September 2020, representing an increase of 0.37%.

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 market reached a net Rs. 12.52 lakh crore (US$ 177.73 billion) between FY02–21 (till August 10, 2020).

On November 11, 2020, The Cabinet Committee on Economic Affairs approved continuation and revamping of the scheme for financial support to public–private partnerships (PPPs) in ‘Infrastructure Viability Gap Funding (VGF) Scheme’ until 2024-25 with a total outlay of Rs. 8,100 crore (US$ 1.08 billion).

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