The Indian financial services sector has changed significantly since 1990. Prior to its development, commercial banks and other financial institutions controlled the sector, supplying the funds required by the Indian industry. The financial services industry did not become well-known until after economic deregulation. This area has now developed into a separate industry. In actuality, one of the biggest industries in the world right now is financial services. An essential part of the financial system are financial services. Financial services are the foundation of today's economies.
The Definition of Financial Services
Financial services are a generic term that refers to all financial-related activity. The mobilisation and distribution of savings are referred to as financial services, broadly speaking. It therefore includes all procedures involved in transforming savings into investments. The financial industry provides financial services. Numerous businesses that deal with money management are part of the finance sector. These businesses include banks, credit card providers, insurers, consumer financing firms, stock brokers, investment funds, and a few state-run businesses.
There are various significant segments that make up the Indian financial services market. Mutual funds, pension funds, insurance companies, stockbrokers, wealth managers, financial consulting organisations, and commercial banks are only a few examples of the diverse types of financial institutions, which range from little local players to big global corporations. The services are utilised by individuals, corporate companies, and government agencies.
The following details on these financial services:
1. Finance
The backbone of India's financial services sector is the banking sector. In the nation, there are several cooperative public, private, foreign, regional rural, and urban/rural banks. These financial services are offered by this segment:
Banking services for individuals (checking, savings, debit/credit cards, etc.)
Banking for Companies (merchant services, checking accounts and savings accounts for businesses, treasury services, etc.)
Loans (business loans, personal loans, home loans, automobile loans, working-capital loans, etc.)
The Reserve Bank of India (RBI) oversees and maintains liquidity, capitalization, and financial soundness in the banking industry.
2. Professional Consultation
In India, there is a strong presence of professional financial advice service providers who provide people and companies with a wide range of services, including investment due diligence, M&A counselling, valuation, real estate consulting, risk consulting, and taxes consulting. Numerous service providers, from small domestic consulting firms to huge global enterprises, offer these services.
3. Asset Management
According to the clients' financial objectives, risk tolerance, and time horizons, this segment offers financial services like managing and investing clients' wealth across a variety of financial instruments like debt, equity, mutual funds, insurance products, derivatives, structured products, commodities, and real estate.
4. Mutual Funds
Providers of mutual fund services offer qualified investment counsel to funds made up of different asset classes, notably those tied to debt and equity. The buy-in for mutual fund solutions is typically smaller than that of the stock market and debt products. Because they typically have lower risks, tax advantages, predictable returns, and diversification qualities, these products are particularly well-liked in India. The segment of mutual funds has had double-digit growth in assets under management over the past five years as a result of its acceptance as a low-risk wealth multiplier.
5. Security
The financial services provided by this category can be broadly classified into two types:
Basic Insurance (automotive, home, medical, fire, travel, etc.)
Health Insurance (term-life, money-back, unit-linked, pension plans, etc.)
Insurance is a tool that both people and organisations can use to safeguard themselves from accidents and unanticipated catastrophes. Payouts for these products vary based on a variety of important qualitative and quantitative parameters, including the type of the product, time horizons, customer risk assessment, premiums, and others. Both the life insurance and general insurance sectors are well-represented by insurance companies in India. The insurance industry in India is governed by the Insurance Regulatory and Development Authority of India (IRDAI).
6. Stock Market
The equity-linked investment solutions for customers on the Indian stock exchanges are a part of the stock market segment (National Stock Exchange and Bombay Stock Exchange). Capital appreciation—increases in the equity solution's value and/or dividends—as well as firm distributions to investors—are the main determinants of customer returns.
7. Treasury/Debt Instruments
Among the services offered in this area are investments in bonds issued by both public and private entities (debt). At the conclusion of the investment period, the bond issuer (borrower) repays the investor's principle plus fixed interest payments. This category includes listed bonds, non-convertible debentures, capital-gain bonds, GoI savings bonds, tax-free bonds, and other securities.
8. Tax/Audit Consultation
In the areas of tax and auditing, this segment provides a wide range of financial services. In this services industry, there are segments for both private and corporate clients. These are what they are:
Personal Income Tax (determining tax liability, filing tax-returns, tax-savings advisory, etc.)
Enterprise Tax (determining tax liability, transfer pricing analysis and structuring, GST registrations, tax compliance advisory, etc.)
Solutions including statutory audits, internal audits, service tax audits, tax audits, process/transaction audits, risk audits, stock audits, and others are offered by service providers in the auditing market. These services are necessary to minimise risk while ensuring the qualitative and quantitative efficiency of business organisations. Find out more about taxes in India by visiting this page.
9. Restructuring of Capital
These services are typically offered to businesses and involve changing the capital structure (debt and equity) in an effort to boost profitability or address emergencies like bankruptcies, volatile markets, liquidity shortages, or hostile takeovers. In this market, common financial options include structured deals, lender negotiations, rapid M&A, and capital raising.
10. Portfolio Management
Through portfolio managers who analyse and optimise investments across a wide variety of assets for customers, this segment offers a highly specialised and personalised range of solutions that aid clients in achieving their financial goals (debt, equity, insurance, real estate, etc.). These services are typically provided to HNIs and can be either discretionary (investments made at the fund manager's discretion without client input) or non-discretionary (decisions made with client intervention).
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indian financial services industry, economic liberalization, mutual funds
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