Financial Inclusion

IT SolutionsFinancial Inclusion

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 payment banks to be created recently, thereby adding to the type of entities operating in the sector. However, financial sector in India 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 several reforms to liberalise, regulate and enhance this industry. The Government and Reserve Bank of India (RBI) have taken various measures to facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs). These measures include launching Credit Guarantee Fund Scheme for MSMEs, issuing guideline to banks regarding collateral requirements and setting up a Micro Units Development and Refinance Agency (MUDRA). With a combined push by Government and private sector, India is undoubtedly one of the world’s most vibrant capital markets.

MARKET SIZE

As of January 2022, AUM managed by the mutual funds industry stood at Rs. 38.89 trillion (US$ 518.15 billion) and the total number of accounts stood at 123.1 million.

Inflow in India’s mutual fund schemes via systematic investment plan (SIP) increased by 17% to Rs. 1.05 lakh crore (US$ 13.98 billion) in November 2021 as compared to November 2020. Equity mutual funds registered a net inflow of Rs. 22.16 trillion (US$ 294.15 billion) by end of December 2021.

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 US$ 37.1 billion in FY21. In FY22*, premiums from new businesses of life insurance companies in India stood at US$ 17.6 billion. In the first 10 months of FY22, Non-life insurance sector premiums reached at Rs. 1.82 lakh crore (US$ 24.18 billion).

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. In FY21, US$ 4.25 billion was raised across 55 initial public offerings (IPOs). The number of companies listed on the NSE increased from 135 in 1995 to 1,920 by December 2021.

According to the statistics by the Futures Industry Association (FIA), a derivatives trade association, the National Stock Exchange of India Ltd. (NSE) emerged as the world’s largest derivatives exchange in 2020 in terms number of contracts traded. NSE was ranked 4th worldwide in cash equities by number of trades as per the statistics maintained by the World Federation of Exchanges (WFE) for CY2020.

India is expected to have 6.11 lakh HNWIs in 2025.

INVESTMENTS

  • India’s PE/VC investment were at US$ 77 billion in 2021, which was 62% higher than 2020.
  • In 2021, Prosus acquired Indian payments gaint BillDesk for US$ 4.7 billion.
  • In September 2021, eight Indian banks announced that they are rolling out—or about to roll out—a system called ‘Account Aggregator’ to enable consumers to consolidate all their financial data in one place.
  • In September 2021, Piramal Group concluded a payment of Rs. 34,250 crore (US$ 4.7 billion) to acquire Dewan Housing Finance Corporation (DHFL).
  • Digital payment platforms for rural India:
    • In July, Dvara Kshetriya Gramin Financial Services Pvt Ltd., an NBFC operating in remote rural areas of India, acquired ‘TransactNow’ digital platform, an early phase tech start-up that provides digital financial services to India’s unbanked and underserved population.
    • In August 2021, Neokred, an open banking stack that delivers curated versions of issuance in the payment ecosystem, teamed with Virenxia, a provider of integrated and sustainable solutions for rural transformation and development, to launch the ‘The Kisan Card,’ a special payment card for Indian farmers.
  • In May 2021, the Reserve Bank of India (RBI) granted authorisation to Eroute Technologies to operate as a prepaid payment instruments (PPI) company.
  • In February 2021, the Reserve Bank of India (RBI) cleared the Rs. 34,250 crore (US$ 4.7 billion) acquisition of Dewan Housing Finance Corporation (DHFL) by the Piramal Group.
  • In January 2021, Sundaram Asset Management Company announced the acquisition of Principal Asset Management for Rs. 338.53 crore (US$ 46.78 million).
  • In January 2021, the National Stock Exchange (NSE) launched derivatives on the Nifty Financial Service Index. This service index is likely to provide institutions and retail investors more flexibility to manage their finances.
  • In September 2021, Unified Payments Interface (UPI) recorded 3.65 billion transactions worth Rs. 6.5 trillion (US$ 86.63 billion).
  • The number of transactions through immediate payment service (IMPS) reached 384.88 million (by volume) and amounted to Rs. 3.18 trillion (US$ 43.19 billion) in September 2021.
  • In August 2021, Unified Payments Interface (UPI) recorded 3.55 billion transactions worth Rs. 6.39 lakh crore (US$ 86.00 billion).
  • The number of transactions through immediate payment service (IMPS) reached 377.94 million (by volume) and amounted to Rs. 3.18 trillion (US$ 42.85 billion) in August 2021.

Industries

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