The country’s financial services sector consists of capital markets, the insurance sector and non-banking financial companies (NBFCs). India’s gross national savings (GDS) as a percentage of Gross Domestic Product (GDP) stood at 30.73% in 2020. The number of Ultra High Net Worth Individuals (UHNWI) is estimated to increase from 6,884 in 2021 to 11,198 in 2025. India’s UHNWIs are likely to expand by 63% in the next five years. India is expected to have 6.11 lakh HNWIs in 2025.
India has scored a perfect 10 in protecting shareholders' rights on the back of reforms implemented by the Securities and Exchange Board of India (SEBI) in the World Bank's Ease of Doing Business 2020 report.
India’s Mutual Fund industry has experienced immense growth. In May 2021, the mutual fund industry crossed over 10 crore folios. As of March 2023, AUM managed by the mutual funds industry stood at US$ 482.40 billion (Rs. 39.42 trillion). Inflow in India's mutual fund schemes via systematic investment plans (SIP) stood at US$ 18.09 billion (Rs. 1.5 lakh crore). Equity mutual funds registered a net inflow of US$ 294.15 billion (Rs. 22.16 trillion) by the end of December 2021. The net inflows were US$ 888 million (Rs 7,303.39 crore) in December as compared to a 21-month low of US$ 274.8 million (Rs 2,258.35 crore) in November 2022.
About 17% of assets in the mutual fund industry were generated from B30 locations in December 2021. These assets increased by 25%, from US$ 68.33 billion (Rs. 5.13 lakh crore) in January 2021 to US$ 85.51 billion (Rs. 6.42 lakh crore) in January 2022.
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 a five-year high of Rs. 101,122 crore (US$ 14.47 billion). Investment by FPIs in India’s capital market reached a net US$ 1.42 billion (Rs. 11,631 crore) in April 2023. Investment by FPIs in India’s capital market reached a net US$ 177.73 billion (Rs. 12.52 lakh crore) between FY21 (till August 10, 2020). In FY22, US$ 14.55 billion was raised across 127 initial public offerings (IPOs). The number of companies listed on the NSE increased from 135 in 1995 to 5,311 as of January 2023.
India’s market capitalization had surged by 25% from October 2021, it was at US$ 3.15 trillion. Indian stock market rally made investors US$ 953.68 billion (Rs. 72 lakh crore) in 2021, and Sensex reached an all-time high of 62,868.5 on December 2, 2022. According to Goldman Sachs, investors have been pouring money into India’s stock market, which is likely to reach >US$ 5 trillion, surpassing the UK, and become the fifth-largest stock market worldwide by 2024.
The number of Demat accounts in India reached 11 crore in January 2023. The number of companies listed on the NSE increased from 135 in 1995 to 5,311 as of January 2023.
In September 2021, the international branch of the National Payments Corporation of India (NPCI), NPCI International Payments (NIPL), teamed with Liquid Group, a cross-border digital payments provider, to enable QR-based UPI payments to be accepted in 10 countries in the north and southeast Asia.
In the Union Budget 2023-24, India announced to set up the National Financial Information Registry which shall serve as the central repository of financial and ancillary information to facilitate the efficient flow of credit, promoting financial inclusion, and fostering financial stability. A new legislative framework is to be designed in consultation with RBI to govern this credit public infrastructure.
In the Union Budget 2022-23, India has announced plans for a central bank digital currency (CBDC) which will be known as Digital Rupee. In August 2021, Prime Minister Mr. Narendra Modi launched e-RUPI, a personal and purpose-specific digital payment solution. e-RUPI is a QR code or SMS string-based e-voucher that is sent to the beneficiary’s cell phone. Users of this one-time payment mechanism will be able to redeem the voucher at the service provider without the usage of a card, digital payments app, or Internet banking access.
On September 30, 2021, the Reserve Bank of India communicated that the applicable average base rate to be charged by non-banking financial companies - microfinance institutions (NBFC-MFIs) to their borrowers for the quarter beginning October 1, 2021, will be 7.95%.
In July 2021, Rajya Sabha approved the Factoring Regulation (Amendment) Bill in 2020, enabling ~9,000 NBFCs to participate in the factoring market. The bill also gives the central bank the authority to establish guidelines for improved oversight of the US$ 6 billion factoring sector.
In July 2021, India's largest commodities derivatives exchange, Multi Commodity Exchange of India Ltd., and European Energy Exchange AG (EEX) signed a memorandum of understanding (MOU) with the goal of knowledge sharing and expertise exchange on electricity derivative products. This MoU will make it easier for the two exchanges to collaborate in areas including knowledge sharing, education and training, and event planning in the field of electricity derivatives.
In January 2021, the National Stock Exchange (NSE) launched derivatives on the Nifty Financial Service Index. This service index is likely to provide institutions and retail investors more flexibility to manage their finances.
In January 2021, the Central Board of Direct Taxes launched an automated e-portal on the e-filing website of the department to process and receive complaints of tax evasion, foreign undisclosed assets and register complaints against ‘Benami’ properties.
India’s insurance industry has huge growth potential. India’s insurance market is expected to reach US$ 250 billion by 2025. It also offers an opportunity of US$ 78 billion of additional life insurance premiums between 2020-30. The government has approved 100% FDI for insurance intermediaries and increased the FDI limit in the insurance sector to 74% from 49% under the Union Budget 2021-22. The total first-year premium of life insurance companies reached US$ 40.1 billion in FY22.
