Financial Services Market in India

Financial services market of India
Financial services can be defined as the economic services offered by the financial industry.
In other words the organizations that deal with the management of money can be described
as financial services. These organizations are consist of banks, insurance companies, credit
card companies, credit union banks, investment banks, accountancy companies, consumer
finance companies and stock brokerages etc. India has a diversified financial sector
undergoing in terms of existing financial services firms and rapid expansion new
entities entering the market. The banking regulator has allowed new entities such as
payment banks to be created and thereby adding to the type of entities operating in
the sector .In India financial sector 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 various reforms to liberalise , regulate and
enhance this financial industry .The Reserve Bank of India and government have
taken various measures to facilitate easy access to finance for, Small and medium
enterprises .
India’s financial services sector has been one of the largest and fastest growing
sectors in the economy. The economy has witnessed increased private sector which
including an explosion of foreign banks,
insurance companies, mutual funds, and venture capital and investment institutions.
Banks
In the last decades of the 18th century banking in India in the modern sense originated. The
first banks were Bank of Hindustan (1770-1829) and The General Bank of India, which was
established in 1786. The oldest and the largest bank, still in existence, is the State Bank of
India, which originated in the Bank of Calcutta in June 1806. This was one of the three banks
and the other two banks, Bank of Bombay and the Bank of Madras, all were established
under charters from the British East India Company.In the year 1934 (1 april) to respond the
economic troubles the Reserve Bank of India was founded. RBI is a statutory body . The
main function of RBI is to maintain the supply of money in circulation and for the printing of
currency .
The Indian banking system consists of
 12 public sector banks,

 19 private sector banks,
 46 foreign banks,
 43 regional rural banks,
 1485 urban cooperative banks and
 96,000 rural cooperative banks.
Public sector Bank & Private sector Bank
PUBLIC SECTOR BANK
The public sector banks are owned by government in India , where a majority stake
(i.e more than 50%) is held by the Ministry of finance of various states government of
India.
PRIVATE SECTOR BANK
The private sector bank are those banks where the majority of the stake is held by
shareholders of the bank and not by the government .
Insurance Sector
Indian insurance sector is expected to progress in the upcoming years., many
foreign insurance companies have ventured into the Indian over the past few
years .The insurance industry in India has almost 57 insurance companies . Amoung
which 24 are life insurance business where as 34 are non-life insurance insurers .
In the non-life insurance segment here are 6 public sector insurers life insurance.
The overall market size of the insurance sector is expected to U.S $280 billion in
2020. The year between 2019 to 2023 life insurance industry is expected to increase
at a CAGR of 5.3%.
India’s overall insurance penetration in FY 20 – 3.76%. Life insurance penetration in

FY 20 – 2.82%. Non insurance penetration in FY20- 0.94% . The health insurance
companies in nonlife insurance sector increased by 41% in march 2021 due to rising
demand for health insurance products amid COVID-19 surge.
Insurance Regulatory Development Authority of India

(IRDAI)
Insurance Regulatory Development Authority of India (IRDAI) is a regulatory body which is

created with the motive of protecting your interests. It also regulates the development of the
insurance industry, while supervising insurance-related activities.
In the year 1991 under the act of parliament ( i.e. IRDAI Act 1999) the Insurance Regulatory
Development Authority of India was established for overall supervision and development of
the Insurance sector in India.
Entities which are regulated by IRDAI are as follows:
 Life Insurance Companies – which include both private and public sector companies
 Agency Channel
 General Insurance Companies - which include both private and public sector companies
 Re-insurance companies
 Intermediaries which include the following:
 Corporate Agents
a. Brokers
b. Corporate Agents
c. Surveyors and Loss Assessors.
d. Third Party Administrators

Investment
An investment is an asset or item acquired with the goal of generating income and
appreciation. Appreciation refers to an increase in value of an asset over the time. When an
individual purchases a good as investment, the intension is not to consume the good but
rather to use it in future to create wealth. An investment always concerns the outlay of some
asset today that are time, money, or effort, in hope of greater pay off in the future than that
was originally put in.
MUTUAL FUNDS - A mutual fund is an professionally managed investment fund that

pools money from many investors to purchase securities. Mutual funds are the largest proportion
of equity of the U.S. corporations. Mutual fund investors are retail or institutional in nature. The
term is typically used in the United States, Canada and India while similar structures across the
globe include the SICAV in Europe ('investment company with variable capital') and open-end
investment company (OEIC) in UK.
SHARE MARKET- A market where shares are publicly issued and traded is
known as share market. On a stock exchange, one can only buy and sell the stocks
that are listed on it. Hence, buyers and sellers meet at stock market. India's prime
stock exchanges are The National Stock Exchange(NSE) and The Bombay Stock
Exchange(BSE). Companies list their shares for the first time on a stock exchange
through IPO. Investors can trade in these shares through secondary market. In the
year 1992 the Securities and Exchange Board of India (SEBI) was established,
which regulates the stock market of India.
Foreign institutional investors

A foreign institutional investor, or FII, is a hedge fund manager, pension fund
manager, mutual fund, bank, insurance firm or representative agent of these
entities who is registered to invest in a foreign country. The FII takes equity
positions in foreign financial markets on behalf of the entity that is based in
another country.
A foreign institutional investor (FII) is an investment fund investing in a country
outside of the one in which it is registered. The term foreign institutional investor is
most commonly used in India, where the entities investing in the nation's financial
markets. FII institution established outside India which purpose is to make
investment in securities in India (registered in accordance with Section 2 of the SEBI
(FII) regulations 1995 )
In financial year 2021, India has recorded the highest ever FII inflows of $37.6
billions greater than the cumulative inflows of the last six years.
Motilal Oswal Financial Services, DIIs recorded the first outflows of $18.4 billion after
five years of inflows as per the report.
GOVERNMENT SECTOR
The aggregate macroeconomic sector that includes all the levels of
government, including federal, state, and local. The primary function of the
government sector, also termed the public sector, is to impose resource allocation
decisions on the rest of the economy that might not be made otherwise.
VENTURE CAPTITAL
Venture capital is a form of private equity financing that is provided by the venture
capital firms or funds to start ups, early-stage, and emerging companies that have
been deemed to have high growth potential or which have demonstrated high
growth. The various types of venture capital are classified as per their applications at
various stages of business. There are three principal types of venture capital that
are early stage financing, expansion financing and acquisition/buyout
financing.
Based on detailed research from Cambridge Associates, the top quartile of venture
capital funds have an average annual return ranging from 15% to 27% over the
past 10 years, compared to an average of 9.9% S&P 500 return per year for each of
those ten years.
A venture capitalist is a private equity investor that provides capital to the
companies by exhibiting high growth potential in exchange for an equity stake.
This could be funding start up ventures or supporting small companies that wish to
expand but do not have access to equities markets.

Financial Services Market in India

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Financial services market of India

The Indian banking system consists of

 12 public sector banks,

India’s overall insurance penetration in FY 20 – 3.76%. Life insurance penetration in

Insurance Regulatory Development Authority of India

Insurance Regulatory Development Authority of India (IRDAI) is a regulatory body which is

c. Surveyors and Loss Assessors.

d. Third Party Administrators

MUTUAL FUNDS - A mutual fund is an professionally managed investment fund that

Foreign institutional investors

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