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Financial Services Brief

India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The banking regulator has allowed new entities such as payments banks to be created recently thereby adding to the types of entities operating in the sector. However, the financial sector in India is predominantly a banking sector with commercial banks accounting for more than 64 per cent of the total assets held by the financial system.

Total outstanding credit by scheduled commercial banks of India stood at US$ 1.06 trillion!. The Association of Mutual Funds in India (AMFI) data show that assets of the mutual fund industry have reached a size of Rs 12.62 trillion (US$ 185 billion)@. During April 2015 to February 2016 period, the life insurance industry recorded a new premium income of Rs 1.072 trillion (US$ 15.75 billion), indicating a growth rate of 18.3 per cent. The general insurance industry recorded a 14.1 per cent growth in Gross Direct Premium underwritten in FY2016 up to the month of February 2016 at Rs 864.2 billion (US$ 12.7 billion).

Investment corpus in India’s pension sector is expected to cross US$ 1 trillion by 2025, following the passage of the Pension Fund Regulatory and Development Authority (PFRDA) Act 2013.

Recent Developments
  • Thomas Cook India, an integrated travel and travel related financial services company, has entered into a partnership with Western Union Business Solutions, with a view to assist Small and Medium-sized Enterprises (SMEs) in India with their trade payments across borders
  • Kotak Mahindra Bank Limited has bought 19.9 per cent stake in Airtel M Commerce Services Limited (AMSL) for Rs 98.38 crore (US$ 14.43 million) to set up a payments bank. AMSL provides semi-closed prepaid instrument and offers services under the ‘Airtel Money’ brand name
  • BankBazaar.com, an online financial services marketplace operated by A&A Dukaan Financial Services Private Limited, has initiated its international business expansion plan by starting a wholly owned subsidiary in Singapore, to tap into mortgages and credit cards market in Singapore and other Asian markets, thus expanding the business potential for the company
  • Tata Capital, the financial services arm of Tata Group, plans to raise Rs 2,000 crore (US$ 293.4 million) for its real estate fund, from State General Reserve Fund (SGRF), the sovereign wealth fund of Oman
  • Ujjivan Financial Services Ltd, a microfinance services company, has raised Rs 312.4 crore (US$ 45.84 million) in a private placement from 33 domestic investors including mutual funds, insurance firms, family offices and High Net Worth Individuals (HNIs), ahead of its planned Initial Public Offering (IPO)
  • Insurance firm AIA Group Ltd has decided to increase its stake in Tata AIA Life Insurance Co Ltd, a joint venture owned by Tata Sons Ltd and AIA Group from 26 per cent to 49 per cent
  • Canada-based Sun Life Financial Inc plans to increase its stake from 26 per cent to 49 per cent in Birla Sun Life Insurance Co Ltd, a joint venture with Aditya Birla Nuvo Ltd, through buying of shares worth Rs 1,664 crore (US$ 244.14 million