The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities and is predominantly a banking sector with commercial banks accounting for more than 60 per cent of the total assets held by the financial system.
India is undoubtedly one of the world's most vibrant capital markets and the advent of technology has also aided the growth of the industry. About 75 per cent of the insurance policies sold by 2020 would, in one way or another, be influenced by digital channels during the pre-purchase, purchase or renewal stages.
The size of banking assets in India had reached US$ 1.8 trillion in FY13 and is expected to touch US$ 28.5 trillion by FY25. Investment corpus in India's pension sector could cross US$ 1 trillion by 2025, following the passage of the Pension Fund Regulatory and Development Authority (PFRDA) Act 2013. The progress of India’s foreign exchange (Forex) reserves was highlighted on July 25, 2014 as it touched US$ 320.56 billion on which was just US$ 23 million less than the all-time high of US$ 320.79 billion achieved on September 2, 2011.
Few of current foreign Investments
The enterprise value of deals on which law firms have advised has shot up to US$ 35.7 billion in 2015, a 22 per cent increase over the US$ 29.3 billion in deals seen in the whole of 2013.
- Financial services provider Reliance Capital Ltd, a part of Anil Ambani’s Reliance Group, has formed a long-term strategic alliance with Japan’s Sumitomo Mitsui Trust Bank Ltd, offering the Japanese lender a small equity stake in the company. As part of the agreement, Sumitomo Mitsui Trust Bank will pick up an initial 2.77 per cent stake in Reliance Capital for Rs 371 crores (US$ 60.22 million) through a preferential allotment of shares.
- GIC, Singapore's sovereign wealth fund, is buying about 70 per cent stake in BSE-listed Nirlon for Rs 1,392.6 crores (US$ 226.07 million). Nirlon owns an information technology park in the western suburbs of Mumbai. GIC said it had signed agreements to buy 39.2 per cent in Nirlon from its promoters, including the Sagar family, for Rs 784.3 crores (US$ 127.32 million). It will make an open offer for 28.4 per cent stake from public shareholders at the same price.
- Canada pension plan investment board, which manages assets worth CAD 234.4 billion (US$ 193.92 billion), has through a subsidiary invested Rs 1,000 crores (US$ 162.34 million) in L&T Infrastructure Development Projects Ltd, a unit of Larsen and Toubro Ltd, India’s largest engineering and construction company. The investment is made by way of subscribing compulsory convertible preference shares, L&T said in a statement. In June, L&T and Canada Pension Plan had signed a definitive investment agreement.
Government Initiatives and Future Plans
India is among the most vibrant global economies, on the back of robust banking and insurance sectors and the country is expected to become the fifth largest banking sector globally by 2020. Many banks, like HDFC, ICICI and AXIS are exploring the option to launch contact-less credit and debit cards in the market soon. The cards, which use near field communication (NFC) mechanism, will allow customers to transact without having to insert or swipe.
- The RBI has simplified the rules for credit to exporters. Exporters can get long-term advance credit from banks for up to 10 years to service their contracts.
- To help Micro Small and Medium Enterprises (MSME), RBI has permitted setting up of an exchange-based trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers, including government departments and PSUs.
- The Government of India plans to reduce its stake in public sector banks to 52 per cent. The reduction of stake is expected to fetch the government Rs 89,120 crores (US$ 14.46 billion) on the basis of the share prices as on November 21, 2014.
- The Government of India has cleared a proposal by HDFC Bank Ltd, to increase the foreign investment limit in the lender while taking the view that the stake held by its parent Housing Development Finance Corp Ltd (HDFC) amounts to overseas investment. The Foreign Investment Promotion Board (FIPB) has approved HDFC Bank’s proposal to increase foreign investment in the bank to 74 per cent.
- The Reserve Bank of India (RBI) has created four verticals, which will be looked after by each of the deputy governors, as part of organisational restructuring move.
- To give a boost to ship building in the country, the Export-Import Bank of India (Exim Bank) is planning to set up a dedicated Rs 1,500 crores (US$ 243.37 million) fund with Government support.