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Indian Financial Sector – Growth, Maturity and Promise

The Indian Financial Sector is made of various components like Mutual Funds, the Insurance sector, Fintech, Banks etc.

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The Indian Financial system has been dominated by the Government since its Independence. When we started shedding away our desperate urge to control every aspect of the economy, the Financial Sector found a new lease of life. Now the sector comprises commercial banks, insurance companies, co-operatives, pension funds, non-banking financial companies, mutual funds and other smaller financial entities.

The Financial sector is the lifeblood of any economy. The reforms of 1991 paved the way for greater private investment in the industry. Financial sector reforms in India have improved resource mobilization and allocation. The liberalization of interest rates and the easing of cash reserve norms have helped make funds available to various sectors.

Banks hold 64% of all the assets in the Financial system making them the dominant player in this sector. There are 22 private sector banks, 12 public sector banks, 46 foreign banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks.

The rapid rise of the Indian economy has been directly responsible for the growth of the Financial Services in India. Resource and funds mobilization has been increasing with improvement with Mobile, internet banking and extension of facilities at ATMs. This has also led to the rise in demand for certified courses like Company Secretary, Chartered Accountancy, CFA etc

How big is the Indian Financial Sector?

The Indian Financial Sector is made of various components like Mutual Funds, the Insurance sector, Fintech, Banks etc. The banking sector has assets worth USD 2.48 Trillion in FY21 among which public and private banking sectors were USD 1,602.65 billion in the public sector banks and USD 878.56 billion by private sector banks.

Mutual Funds consist of USD 477 Billion of assets in May 2022. SIP investments in mutual funds stood at USD 15.91 in FY22 and equity mutual funds were USD 294 Billion in December 2021.

The insurance industry of the Indian Financial Sector can be divided into 2 broad segments which are Life Insurance and non-life insurance. The insurance sector has been rising at 5.8% in the first half of FY22. The Life insurance sector has increased by 12.93% in 2021-22 and the non-life insurance sector increased by 11.1% during the same period. The insurance density stands at USD 58 for life insurance and USD 19 for non-life insurance.

With the development of the banking sector, the Indian Financial network boasts 213,145 ATMs out of which 47.5% are in rural and semi-urban areas. According to Ind-Ra, credit growth is expected to hit 10% in 2022-23 which will be double-digit growth in eight years and as of now, bank credit stood at USD 1.5376 Trillion.

Important Professions in the Indian Financial Sector

Investment Banker: Investment Bankers can work both in govt and private sectors where they use their financial knowledge, analytical skills and communication abilities to help their employers during raising capital, acquisitions, mergers and client delivery. A postgraduate degree in finance with certification courses like CFA course will help the student become an Investment banker.

IT Auditor: IT auditor ensures compliance with global regulatory requirements of a company and thus top accounting firms have great demand for them. Students will need to have a CISA or CISM certificate along with a Master’s Degree in order to start a career as an IT Auditor.

Chief Financial Officer: The CFO of a company looks at all financial inflows and outflows of a company along with its accounting and regulation. A CFO looks at all the finances, audits them, prepares the budget, communicates the company forecast and raises additional funding if required. A CFO does all these with seamless communication with the President, VP of Sales and other Department heads.

Financial Advisor: A Financial Advisor advises a business about how, where and when to invest keeping in mind the financial goals of clients in terms of returns and also in terms of savings, budget, insurance, and tax strategies. In order to provide business advice to clients, a student must have a Master’s Degree in Finance like MBA in Finance and then register with SEBI to obtain the RIA credential.

Chartered Accountant: A CA looks at the regulatory requirements of a company. A chartered accountant is responsible for Accountancy and auditing, Management Consultancy, Tax management, Cost accountancy etc. Students must clear 3 level exams and complete 4-5 years of internship in order to become a CA.
Future of Finance in India

Innovation and policy support have pushed the growth of Financial services in India. The banking sector has pushed its reach in all of India. According to Global Findex Report 2017, 80% of Indian adults have a bank account as compared to 35% in 2011. This helps more people to be a part of the Financial System and facilitates more financial support. The growth of deposits in banks has been at 12.38% between FY16-FY21.

New technology has played a vital role in the growth of the Financial sector. Fintech Startups have been growing at 25% and their valuation is about to reach USD 150 Billion by 2025 according to Economic Times. The adoption of Fintech is 87% which ensures better facilities for the customers.

RBI-led Unified Payment Interface has been a great discovery. The growth of UPI payments has been 50% in terms of volume and 6% in terms of value according to Invest India. In May 2022, UPI recorded 5.95 billion transactions worth USD 132.86 billion.

Conclusion

The Financial Services in India is on the right track with the Reserve Banking of India providing stability and incentive to grow. The Indian Financial System has become a very efficient eco-system that is also vibrant and growing. There are huge investments in the Fintech space with USD 30 Billion funding since 2014. Apart from that, the rate of adoption is 87%, which is the highest in the world. It is estimated that the Fintech industry will grow from USD 50 Billion in 2021 to USD 150 Billion in 2025.

(ThePrint ValueAd Initiative content is a paid-for, sponsored article. Journalists of ThePrint are not involved in reporting or writing it.)  

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