by The financial sector in India had an overall growth of 15%, which has exhibited stability over the last few years although several other markets across the Asian region were going through a turmoil. The development of the system pertaining to the financial sector was the key to the growth of the same. With the opening of the financial market variety of products and services were introduced to suit the need of the customer. The Reserve Bank of India (RBI) played a dynamic role in the growth of the financial sector of India.
Market Size
As of August 2021, AUM managed by the mutual funds industry stood at Rs. 36.59 trillion (US$ 492.77 billion) and the total number of accounts stood at 108.5 million. In May 2021, the mutual fund industry crossed over 10 crore folios. 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.
As of September 2021, AUM managed by the mutual funds industry stood at Rs. 36.73 trillion (US$ 489.11 billion).
Another crucial component of India’s financial industry is the insurance industry. Insurance industry has been expanding at a fast pace. The total first year premium of life insurance companies reached Rs. 2.59 lakh crore (US$ 36.73 billion) in FY20.
Furthermore, India’s leading bourse, Bombay Stock Exchange (BSE), will set up a joint venture with Ebix Inc to build a robust insurance distribution network in the country through a new distribution exchange platform.
Growth of the Capital Market in India
- The ratio of the transaction was increased with the share ratio and deposit system.
- The removal of the pliable but ill-used forward trading mechanism.
- The introduction of infotech systems in the National Stock Exchange (NSE) in order to cater to the various investors in different locations.
- Privatization of stock exchanges.
Growth in the Insurance sector in India
- With the opening of the market, foreign and private Indian players are keen to convert untapped market potential into opportunities by providing tailor-made products.
- The insurance market is filled up with new players which has led to the introduction of several innovative insurance-based products, value add-ons, and services. Many foreign companies have also entered the arena such as Tokio Marine, Aviva, Allianz, Lombard General, AMP, New York Life, Standard Life, AIG, and Sun Life.
- The competition among the companies has led to aggressive marketing, and distribution techniques.
- The active part of the Insurance Regulatory and Development Authority (IRDA) as a regulatory body has provided to the development of the sector.
Growth of the Venture Capital market in India
- Presently in India there are around 34 national and 2 international SEBI registered venture capital funds.
- The venture capital sector in India is one of the most active in the financial sector inspite of the hindrances by the external set up.
Government Initiatives
- On September 30, 2021, the Reserve Bank of India communicated that the applicable average base rate to be charged by non-banking financial company – micro finance institutions (NBFC-MFIs) to their borrowers for the quarter beginning October 1, 2021, will be 7.95%.
- On September 30, 2021, the IFSC Authority constituted an expert committee to recommend approach towards development of sustainable finance hub and provide road map for the same.
- In August 2021, Prime Minister Mr. Narendra Modi launched e-RUPI, a person and purpose-specific digital payment solution. e-RUPI is a QR code or SMS string-based e-voucher that is sent to the beneficiary’s cell phone. Users of this one-time payment mechanism will be able to redeem the voucher at the service provider without the usage of a card, digital payments app, or internet banking access.
- In July 2021, Rajya Sabha approved the Factoring Regulation (Amendment) Bill in 2020, enabling ~9,000 NBFCs to participate in the factoring market. The bill also gives the central bank the authority to establish guidelines for improved oversight of the US$ 6 billion factoring sector.
- In July 2021, India’s largest commodities derivatives exchange, Multi Commodity Exchange of India Ltd., and European Energy Exchange AG (EEX) signed a memorandum of understanding (MOU) with the goal of knowledge sharing and expertise exchange on electricity derivative products. This MoU will make it easier for the two exchanges to collaborate in areas including knowledge sharing, education and training, and event planning in the field of electricity derivatives.
- 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.
- 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 assets and register complaints against ‘Benami’ properties.
