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 (UHNWIs), with wealth of US$ 30 million or more, is expected to rise 63% between 2020 and 2025 to 11,198; India has the second-fastest growth in the world.

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.

As of April 2021, AUM managed by the mutual funds industry stood at Rs. 3,237,985 crore (US$ 444.11 billion).  Inflow in India's mutual fund schemes via systematic investment plan (SIP) were Rs. 96,080 crore (US$ 13.12 billion) in FY21. Equity mutual funds registered a net inflow of Rs. 8.04 trillion (US$ 114.06 billion) by end of December 2019.

16% assets in the mutual fund industry were generated from B30 locations in March 2021. These assets decreased by 1.29%, from Rs. 5.23 lakh crore (US$ 71.72 billion) in March 2021 to Rs. 5.17 lakh crore (US$ 70.90 billion) in April 2021.

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).

Indian stock markets—S&P Sensex and Nifty50—rose 15.75 and 14.90%, respectively, in 2020. For the decade ended 2020, the Sensex gained a whopping 173% and Nifty surged by 169%.

In January 2021, the National Stock Exchange (NSE) launched derivates 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 assests and register complaints against ‘Benami’ properties.

In FY21, US$ 4.25 billion was raised across 55 initial public offerings (IPOs).

In December 2020, a US$ 50-million policy-based loan to enhance financial management practices and operational efficiencies aimed at achieving greater fiscal savings, fostering informed decision-making and enhancing service delivery in West Bengal was signed by the Asian Development Bank (ADB) and the Government of India.

In December 2020, the Reserve Bank of India issued a draft circular on declaration of dividends by NBFCs, wherein it proposed that NBFCs should have at least 15% Capital to Risk Weighted Assets Ratio (CRAR) for the last 3 years, including the accounting year for which it proposes to declare a dividend.

The government has approved 100% FDI for insurance intermediaries and increased FDI limit in the insurance sector to 74% from 49% under the Union Budget 2021-22.