Module 1: Evolution of Financial Services ( 2 sessions)
1. Overview of financial sector IBEF report
Investments/Developments
In 2019, FPI investments in Indian equities touched a five-year high of Rs 101,122
crore (US$ 14.47 billion).
Total Merger and Acquisition (M&A) worth US$ 25.162 billion was recorded in first
ten months of 2019.
Total value of Private Equity (PE)/Venture Capital (VC) investments grew 44 per cent
over past three years in value terms to reach US$ 48 billion in 2019.
Mutual Funds asset base stood at Rs 27,22,937 crore (US$ 389.60 billion) at end of
February 2020.
In November 2019, the government will invest Rs 10,000 crore (US$ 1.43 billion) in
the Rs 25,000 crore (US$ 3.58 billion) alternative investment fund (AIF).
In October 2019, ICICI Lombard General Insurance Company acquired Unbox
Technologies for an aggregate cash consideration of Rs 225 crore (US$ 32.19
million).
In 2018, Rs 30,959 crore (US$ 4.43 billion) were raised from initial public offerings
(IPOs) whereas in financial year 2019, total funds raised stood at Rs 19,900 crore
(US$ 2.85 billion).
The equity mutual funds registered a net inflow of Rs 6,489 crore in September 2019.
There were 9,659 non-banking financial companies (NBFCs) registered with the
Reserve Bank as on March 31, 2019.
In FY19, over 3,133 core digital transactions were registered and reached 1,527 crore
in FY20 (till September 2019).
Government Initiatives
In November 2019, government allocated Rs 10,000 crore to set up AIFs for revival
of stalled housing projects.
Under the Interest Subvention Scheme for MSMEs, Rs 350 crore (US$ 50.07 million)
has been allocated under Union Budget 2019-20 for 2 per cent interest subvention for
all GST registered MSMEs, on fresh or incremental loans.
In December 2018, Securities and Exchange Board of India (SEBI) proposed direct
overseas listing of Indian companies and other regulatory changes.
Bombay Stock Exchange (BSE) introduced weekly futures and options contracts on
Sensex 50 index from October 26, 2018.
In September 2018, SEBI asked for recommendations to strengthen rules which will
enhance the overall governance standards for issuers, intermediaries or infrastructure
providers in the financial market.
The Government of India launched India Post Payments Bank (IPPB), to provide
every district with one branch which will help increase rural penetration. As of
August 2018, two branches out of 650 branches are already operational.
Road Ahead
India is expected to be fourth largest private wealth market globally by 2028.
India is today one of the most vibrant global economies, on the back of robust
banking and insurance sectors. The relaxation of foreign investment rules has received
a positive response from the insurance sector, with many companies announcing plans
to increase their stakes in joint ventures with Indian companies. Over the coming
quarters there could be a series of joint venture deals between global insurance giants
and local players.
The Association of Mutual Funds in India (AMFI) is targeting nearly five-fold growth
in assets under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a
more than three times growth in investor accounts to 130 million by 2025.
India's mobile wallet industry is estimated to grow at a Compound Annual Growth
Rate (CAGR) of 150 per cent to reach US$ 4.4 billion by 2022 while mobile wallet
transactions to touch Rs 32 trillion (USD $ 492.6 billion) by 2022.
B. Types of Financial Services offered in India:
Banking
Professional Advisory
Wealth Management
Mutual Funds
Insurance
Stock Market
Treasury/Debt Instruments
Tax/Audit Consulting
Capital Restructuring
Portfolio Management
C. Fund based and Fee-based Financial Services
Services used to acquire fund or assets for the customer is known as Fund
based financial services.
When Financial institutions operate in specialized field to earn income in form
of fees, commission, interest, brokerage or dividend is called as fee based
financial services.
D. Role of Fintech in Financial Sector
FinTech in India is expected to increase at a CAGR of 20.2% during 2017-21 to reach $92
bn
The Fintech industry in India is categorised into 4 major segments namely
WealthTech, Payments, Lending and InsureTech. The WealthTech Industry in India is
witnessing the emergence of startups with innovative technologies and business
models. Growing personal wealth, increased adoption of mobile & digital channels, reduced
asymmetry of information between small & large financial institutions and investors, are
some of the factors propelling the industry forward. Digital payments have been the flag
bearer of the Indian FinTech space. In 2010, India launched its first real-time payments
systems ‘IMPS’ and introduced UPI in 2016. There are 375 Payment startups in the
country. Mobile/digital wallets, gateways, POS/ mobile POS sub-segments account for over
50% of the payment startups in India. In consumer credit, the urban population is likely to
leverage FinTech lending services to avoid heavy documentation, and the rural population
(which is new to credit) can benefit from alternative credit scoring mechanisms to stay away
from loan sharks.
The scope of IoT in Indian Insurance goes beyond telematics and customer risk assessment.
Currently, there are 110+ InsureTech start-ups operating in India.