Brief Overview

The services sector has been a great stimulus to the Indian economy accounting for 56.9 per cent
of the gross domestic product (!"#$ wherein the financial services segment has been a ma%or
contributor. The growth of the financial sector in India at present is nearly &.5 per cent per year.
!ominated by commercial ban's which have over 6( per cent share of the total assets$ India)s
financial sector comprises commercial ban's$ insurance firms$ non*ban'ing institutions$ mutual
funds$ cooperatives and pension funds$ among other financial entities.
The last two decades have seen the sector developing a more contemporary outloo'. The
overnment of India has helped in this development$ introducing reforms to liberalise$ regulate
and enhance the country)s financial services. Today$ India is recognised as one of the world)s most
vibrant capital mar'ets. +otwithstanding challenges$ the sector)s future seems to be in good hands.
Insurance ,ector
!igital channels will influence nearly -5 per cent of the insurance policies sold by .(.( during the
pre*purchase$ purchase or renewal stages$ according to a report titled /!igital0Insurance*.(1 By
.(.() by Boston 2onsulting roup (B2# and oogle India. 3ccording to the report$ insurance
sales from online channels will be .( times what it is today by .(.($ with overall internet
influenced sales e4pected to be around 5s 6(($(((78(($((( crore (9,: 5(.6;76-.(6 billion#.
Indian insurance companies will spend 5s ;.$;(( crore (9,: ..(; billion# on information
technology (IT# products and services in the current year$ a ;. per cent increase over .(;6$
according to artner Inc. This forecast ta'es into account spending by insurers on internal and
e4ternal IT services$ software$ hardware and telecommunications. The software segment is
predicted to be the fastest developing e4ternal segment$ which is increasing at ;& per cent in .(;8
overall$ driven by the growth of insurance*specific software.
Ban'ing ,ervices
Indian ban's operating overseas saw higher credit growth in comparison to their foreign
counterparts operating in India$ according to 5eserve Ban' of India)s (5BI# survey on
international trade in ban'ing services. The survey for .(;.7;6 showed growth of credit e4tended
by Indian ban's) branches operating overseas to have increased by 6;.- per cent to 5s 5&5$5-(
crore (9,: 9&.;& billion#.
Increased growth in agriculture and services sectors as well as in the personal loans segment$
helped ban' credit grow during the 3pril7+ovember period of .(;6 by -.. per cent< during the
same period of .(;.$ ban' credit growth stood at 6.6 per cent. =>igher growth in credit to
agriculture may be attributed to the e4pected better 'harif crop which has been announced by the
?inistry of 3griculture$= stated the report by credit rating agency 235@ 5atings.
?utual Aunds Industry in India
?ore than &( per cent of Indian investors are satisfied with their mutual fund schemes$ according
to a survey by Ainancial Intermediaries 3ssociation of India (AI3I#. The survey also stated that 6(
per cent of the mutual fund investors were satisfied with services of advisers and distributors of
investment schemes.
"rivate @Buity$ ?ergers C 3cBuisitions in India
?ergers and acBuisitions (?C3# activity between India and the @uropean 9nion is poised to
grow in AD .(;87;5$ according to ?umbai*based investment ban' 3vendus 2apital. The IT and
business process outsourcing (B"O# industry are e4pected to lead the way in scouting for
acBuisitions in @urope.
"rivate eBuity ("@# firms invested 9,: ...- billion in the period of Eanuary7?arch .(;8$ a 96 per
cent increase from the investments (9,: ;.;& million# made during the same Buarter of .(;6.
There were five investments of 9,: ;(( million or more in the Buarter against one in the
corresponding period of .(;6.
Aoreign Institutional Investors (AIIs# in India
+on*resident Indians (+5Is# and AIIs will now be allowed to invest in the insurance sector$ within
the overall .6 per cent cap on foreign direct investment (A!I#. The department of industrial policy
and promotion (!I""# in a press note confirmed that apart from insurance companies$ the
rela4ation would also cover insurance bro'ers$ third*party administrators (T"3s#$ surveyors and
loss assessors.
AIIs were gross buyers of debt securities valued at 5s 6($.66 crore (9,: 5.(- billion# and sellers
of bonds worth 5s ;;$85( crore (9,: ;.9; billion# in the period Eanuary ;7.8$ .(;8$ which
resulted in a net inflow of 5s ;&$&;6 crore (9,: 6.;5 billion#$ according to data released by the
,ecurities and @4change Board of India (,@BI#. 3lso$ during the same period$ AIIs invested 5s
6$8-6 crore (9,: 5&...; million# into the eBuity mar'et$ ma'ing their total investment in debt and
stoc's to be around 5s ..$.&9 crore (9,: 6.-6 billion#.
Aoreign investors invested about 5s 6-;$68. crore (9,: 6...5 billion# into India)s stoc' mar'et in
the four years ended !ecember .(;6. This figure surpasses the investments in the boom years of
.((57(&.
Investments by AIIs in the Indian stoc' mar'et crossed the 5s ; trillion (9,: ;6.-- billion# mar'
in !ecember .(;6 7 the third time this has been achieved since AIIs) entry into the capital mar'et
in ;99.796.
Ainancial ,ervices in IndiaF 5ecent !evelopments
3merican @4press 2o. has bought a minority sta'e in Bengaluru*based payment device ma'er
@Getap ?obile ,olutions. In Aebruary .(;8$ @Getap had received venture funding of 5s 89.& crore
(9,: &.68 million# from a group of investors headed by venture fund >elion Henture "artners.
=This investment is a validation about what we are doing and the potential of the mar'et$= said ?r
3bhi%it Bose$ cofounder of @Getap.
+on*ban'ing financial company (+BA2# ?anappuram Ainance Itd (?AI# has entered into an
agreement to acBuire ?ilestone >ome Ainance 2ompany from Eaypee >otels. The transaction is
?AIJs strategy to broaden its business by venturing into the profitable lucrative housing finance
space$ as per a press statement released by the company.
Ainancial ,ervicesF overnment Initiatives
iven the growth of the Indian film industry$ Third @ye 2inema Aund (T2@A#$ a ,@BI*registered
alternative investment fund$ is set to enter the Indian mar'et. Those not connected with the >indi
film segment will now soon be able to reap the benefits of the sector)s growth. T2@A aims to
generate about .5 per cent returns.
In an effort to give impetus to bilateral ties$ India and ,outh Korea have decided to strengthen
cooperation in many 'ey sectors$ including trade$ investment and defence. +ine pacts in different
fields$ including one in cyber space cooperation$ were in'ed following tal's between the Indian
prime minister and the ,outh Korean president.
5oad 3head
India is one of the top ;( economies in the world$ helped in no small part by its strong ban'ing
and insurance sectors. It is e4pected to become the fifth largest ban'ing sector in the world by
.(.( and the third largest by .(.5$ according to a %oint report by K"?72II. The report e4pects
ban' credit to grow at a compound annual growth rate (235# of ;- per cent in the medium term
leading to better credit penetration.
The insurance sector also has bright times ahead. Iife Insurance 2ouncil$ the industry body of life
insurers in India$ has estimated a 235 of ;.7;5 per cent over the ne4t few years for the
segment$ with the country)s insurable population pro%ected to touch -5( million by AD .(.(.
@4change 5ate 9sedF I+5 ; L 9,: (.(;6-6 as on 3pril .$ .(;8