Indian Financial Services Industry 2011 - Overview



Financial Services in India- Brief Overview

Financial services industry is the mainstay of any economy as it mirrors the financial health of the country. Indian financial markets are highly regulated with different authorities keeping an eye on every avenue of financial sub-segments viz. Stock markets, mutual funds, insurance and banking. Stock markets are regulated by Securities and Exchange Board of India (SEBI) while Insurance Regulatory and Development Authority (IRDA) keeps an eye on the insurance industry. Similarly, Reserve Bank of India (RBI) keeps a check on the Indian banking sector and Association of Mutual Funds in India (AMFI) takes care of the mutual fund segment.


India boasts of a Rs 23, 000 crore (US$ 4.44 billion) - financial services distribution and advice market. Recent developments, Government measures, key facts and figures pertaining to the same are discussed hereafter.

Insurance Sector

Even when the turbulent times are prevalent in the global financial markets, Indian consumers have not lost faith in their financial systems. This fact is majorly driving Indian insurance market.
According to the data released by Life Insurance Council, total premium collected (including both new and renewal premiums) during April-September 2011 stood at Rs 1,22,661 crore (US$ 23.69 billion). In the same period, the renewal premium collection increased by 17 per cent to Rs 73,575 crore (US$ 14.21 billion), as against Rs 62,818 crore (US$ 12.13 billion) in the corresponding period in 2010.


Till September 30, 2011, promoters of life insurance companies had injected over Rs 32,720 crore (US$ 6.32 billion) as capital. Also, there was an investment of more than Rs 200,000 crore (US$ 38.62 billion) in infrastructure development in the sector.

The council further predicts an upsurge in new premium collections during October 2011-March 2012.

Banking Services

Ratings agency Moody's believe that strong deposit base of Indian lenders and Government's persistent support to public sector and private banks would act as positive factors for the 64 trillion (US$ 1.23 trillion) Indian banking industry amidst the negative global scenario.


  • According to the RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks', March 2011, Nationalised Banks, as a group, accounted for 53.0 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.6 per cent. The share of new private sector banks, Old private sector banks, Foreign banks and Regional Rural banks in aggregate deposits was 13.4 per cent, 4.6 per cent, 4.4 per cent and 3 per cent respectively.

    With respect to gross bank credit also, nationalised banks hold the highest share of 52.8 per cent in the total bank credit, with SBI and its associates at 22.1 per cent and New Private sector banks at 13.2 per cent. Foreign banks, Old private sector banks and Regional Rural banks held relatively lower shares in the total bank credit with 4.9 per cent, 4.6 per cent and 2.4 per cent respectively.
  • Another statement from RBI has revealed that bank advances grew 17.08 per cent annually as on December 16, 2011 while bank deposits rose 18.03 per cent.

Mutual Funds Industry in India

Recent data released by AMFI stated that the cumulative average Asset Under Management (AUM) of all fund houses aggregated to about Rs 6,87,640 crore (US$ 132.77 billion) in the last quarter of 2011.


Data compiled at the end of 2011 indicated that HDFC Mutual Fund maintained its top position with an average AUM of Rs 88,737.07 crore (US$ 17.13 billion) while fund houses namely Reliance, ICICI Pru, Birla Sunlife and UTI followed. By the end of 2011, there were a total of 44 fund houses in the country as against 42 in the first quarter of the year.

Private Equity (PE), Mergers & Acquisitions (M&A) in India

Global consultancy firm Ernst & Young (E&Y) has stated that the value of M&A deals involving Indian companies aggregated to US$ 34.4 billion in 2011 involving 806 transactions. There were 177 outbound deals with an aggregate disclosed value of US$ 8.8 billion in 2011; forming 25.6 per cent of the total M&A pie.


Adani Enterprises' acquisition of Abbot Point Coal Terminal in Australia (US$ 2 billion) and the GVK Group's purchase of Australia-based Hancock Coal's Queensland coal assets (US$ 1.3 billion) were among the biggest outbound deals recorded in 2011.

According to data released by auditing and consultancy firm KPMG, India Inc witnessed a 31 per cent increment in PE investment to US$ 7.89 billion during the first three quarters of 2011. PE firms like Blackstone India and Kohlberg Kravis Roberts & Co (KKR & Co) are betting high on Indian markets. The Blackstone India chief was reported to have said that he intends to close 5-6 deals a year in India whose financial valuations would revolve around roughly US$ 100 million to US$ 120 million each.