Background material fdi-in_financial_services

Various Aspects under FEMA
Financial Services
BY CA. Sudha G. Bhushan
This Document provides an overview pertaining to regulatory
framework of Financial Services sector in India and the
Foreign Direct Investment Policy pertaining to same

12/18/2010

Contents

Overview of Foreign Exchange Management Act, 1999

Foreign Direct Investment Policy

About Financial Services

Components of Financial Services

FDI in Financial Services

Indian financial Service Sector – Growth and opportunity

| By CA. Sudha G. Bhushan

Overview of Foreign Exchange Management Act, 1999
The preamble of the act says that it is an Act to consolidate and amend the law relating to
foreign exchange with the objective of facilitating external trade and payments and for
promoting the orderly development and maintenance of foreign exchange market in India.

Foreign Exchange Management Act, 1999 (“FEMA”) has come in force from 1st June, 2000
by replacing Foreign Exchange Regulations Act (“FERA”). The main change that has been
brought is that FEMA is a civil law, whereas the FERA was a criminal law. FERA was popular
for its draconian provisions. The shift of FERA to FEMA was the shift of control of foreign
exchange to regulation and promotion and orderly development of Foreign exchange. FEMA
is forward looking legislation which aims to facilitate foreign trade.

FEMA aims to achieve self regulation instead of imposed restrictions. The rationale for strict
regulations under FERA 1973 after Independence was that India was left with little forex
reserves and during the oil –crisis of seventies ballooning oil import bills further drained
foreign exchange reserves. Unsatisfactory reserves made it imperative to put in place
stringent controls to conserve foreign exchange and to utilise it in the best interest of the
country.

FEMA has 49 Sections of which 9 Sections (Sections 1 to 9) are substantive and the rest are
procedural or administrative. RBI is entrusted with the administration and implementation
of FEMA. RBI has so far issued over 200 Notifications, each of which contains several
regulations for a particular class of transactions, e.g., Notification No. FEMA/21/RB-2000,
deals with acquisition and transfer of immovable property in India.

Notifications are type of self contained set of regulations, which are mostly divided into
three broad parts

(i) Short title and commencement

(ii) Definitions and

(iii) Other provisions

It is interesting to note that the same term may be defined differently for different purposes
in different Notifications. For example, the term “Person of Indian Origin (PIO)” is defined
differently in three Notifications, namely

(i) FEMA 13/2000-RB pertaining to remittance of assets,

(ii) FEMA 21/2000-RB pertaining to acquisition and transfer of immovable property in India
and


(iii) FEMA 24/2000-RB pertaining to investment in a firm or a proprietary concern in India.
The definition section of each Notification makes it clear that the words and expressions
used therein, but not defined in that particular Notification, shall have the same meanings
respectively assigned to them in the Act. Therefore, wherever a particular term is defined in
the Notification, the meaning to be assigned is unique to that Notification and mostly cannot
be applied to another.

Thus, interpretation and application of FEMA provisions and Notifications require utmost
care. FEMA is applicable to the whole of India. The expression “whole of India” would
indicate that the provisions of the Act are applicable to all transactions taking place in India.
Thus, any person who is present in India at the time of transaction has to comply with
provisions of FEMA. FEMA is applicable to all branches, offices and agencies outside India
owned or controlled by a person resident in India. Thus, FEMA has retained its extra-
territorial application, as under FERA.

The Enforcement of FEMA is done through Reserve Bank of India and Central Government.
The power has been given to Central Government [section 46] and RBI [Section 47] to lay
down detailed rules and regulations to carry out the various provisions of the Act. Where
under Section 47 the reserve bank of India can make regulations governing procedural and
administrative aspects of FEMA the central government have been given the power to make
rules governing enforcement of FEMA.The Central Government has established a Directorate
of Enforcement for the purpose of enforcement of Act [section 36]. Officers under
Directorate of enforcement are known as officers of Enforcement. These officers can
investigate the contraventions of FEMA.


Foreing
Exchange
management
Act, 1999

Master Regulations -
circulars Reserve Bank

Regulatory
Framework

Rules- Central
Circulars
Goverment

Notifications


Foreign Direct Investment Policy

To fulfill the need of freeing the Indian industry from excessive official control and for
promoting foreign investments in India in necessary sectors the much required liberalization
of Indian economy was brought in by Industrial Policy of 1991. From then the Indian
economy is more facilitating to Foreign Direct investment in all form.

The intent and objective of the Government is to promote foreign direct investment through
a transparent, predictable, simple and clear policy framework and the which reduces
regulatory burden.

Foreign Direct Investment in India is regulated under FEMA and it regulations. FDI by non-
resident in resident entities through transfer or issue of security to person resident outside
India is a ‘Capital account transaction’ under FEMA, 1999. Keeping in view the current
requirements, the Government from time to time comes up with new regulations and
amendments/changes in the existing ones through order/allied rules, Press Notes, etc. The
Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry,
Government of India makes policy pronouncements on FDI through Press Notes/ Press
Releases which are notified by the Reserve Bank of India as amendment to notification
No.FEMA 20/2000-RB dated May 3, 2000. These notifications take effect from the date of
issue of Press Notes/ Press Releases, unless specified otherwise therein. The procedural
instructions are issued by the Reserve Bank of India vide A.P.Dir. (series) Circulars. The
regulatory framework over a period of time thus consists of Acts, Regulations, Press Notes,
Press Releases, Clarifications, etc.
Foreign Investment can be in two ways
(i) Foreign Direct Investment (FDI) and
(ii) Foreign Portfolio Investment.

“Investment’ is usually understood as financial contribution to the capital of an enterprise or
purchase of shares in the enterprise. ‘Foreign investment’ is investment in an enterprise by
a Non-Resident irrespective of whether this involves new capital or reinvestment of
earnings. One of the difference between FDI and Foreign Portfolio investment is the
objective with which the investment is made. The main motivation of investor of Foreign
Direct Investment is a strategic long term relationship with the direct investment enterprise
to ensure the significant degree of influence by the direct investor in the management of the
direct investment enterprise. Direct investment allows the direct investor to gain access to
the direct investment enterprise which it might otherwise be unable to do. However the
objectives of portfolio investment is different whereby investors do not generally expect to
influence the management of the enterprise.

FDI is defined by International Monetary Fund (IMF) and Organization for Economic
Cooperation and Development(OECD) as a category of cross border investment made by a
resident in one economy (the direct investor) with the objective of establishing a ‘lasting
interest’ in an enterprise (the direct investment enterprise) that is resident in an economy
other than that of the direct investor. In the Indian context, ‘FDI’ means investment by non-
resident entity/person resident outside India in the capital of the Indian company under
Schedule 1 of FEM(Transfer or Issue of Security by a Person Resident Outside India)
Regulations 2000.


It is the policy of the Government of India to attract and promote productive FDI in
activities which significantly contribute to industrialization and socio-economic development.
FDI supplements domestic capital and technology.

FDI EQUITY INFLOWS (MONTH-WISE) DURING THE FINANCIAL YEAR 2010-11:

Financial Year Amount of FDI inflows Amount of FDI inflows
2010-11 (In Rs. Crore) (In US$ mn)
( April-March )
April 2010 9,697 2,179

May 2010 10,135 2,213

June 2010 6,429 1,380

July 2010 8,359 1,785
August 2010 6,196 1,330

September 9,754 2,118
2010
Total 50,570 11005
2010-11 (up
to September
2010)

# Figures are provisional, subject to reconciliation with RBI, Mumbai.
Soruce : www.dipp.nic.in

For detailed statistics on FDI follow:
http://www.dipp.nic.in/fdi_statistics/indian_FDI_September2010.pdf


SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS

Amount Rupees in crores (US$ in million)

RANKS SECTOR 2008-09 2009-10 2010-11

(April- (April- ( April-
March) March)
Sep)

1. SERVICES SECTOR 28,516 20,776 9,506

(financial & non-financial) (6,138) (4,353) (2,067)

2. COMPUTER SOFTWARE & HARDWARE 7,329 4,351 2,438

(1,677) (919) (534)

3. TELECOMMUNICATIONS 11,727 12,338 4,803

(radio paging, cellular mobile, basic (2,558) (2,554) (1,057)
telephone services)

4. HOUSING & REAL ESTATE 12,621 13,586 2,957

(2,801) (2,844) (640)

5. CONSTRUCTION ACTIVITIES 8,792 13,516 1,523

(2,028) (2,862) (332)

6. POWER 4,382 6,908 3,357

(985) (1,437) (729)

7. AUTOMOBILE INDUSTRY 5,212 5,754 825

(1,152) (1,208) (180)

Source: www.dipp.nic.in

For detailed statistics on FDI follow:
http://www.dipp.nic.in/fdi_statistics/indian_FDI_September2010.pdf


Financial Services Sector
Financial Services are defined as a bundle of intangible utilities aimed at satisfying the
needs of users. Financial Services bridges the gap between savers and those who need
funds. A financial service perform

1. Identification of resources for efficient allocation
2. Providing constant evaluation of allotted of resources
3. Providing liquidity to investors

Financial System of any country consists of financial markets, financial intermediation and
financial instruments or financial products.

There are multiple regulators for various financial services in India. For eg; Reserve Bank of
India, IRDA

Financial services in India have prevailed since time immemorial. Kautilya’s Arthashatra can
said to be the first organized literature on financial service where he has amply described
the rules and regulations of money and mint management. The old instruments, like hundi
resemble the bill of exchange or promissory note or bearer cheque of contemporary
financial markets.

Financial services can be categorized into two groups, namely

1. Fund based activities and
2. Non fund based activities

Fund based activities are those where there is involvement of funds like underwriting,
portfolio management, venture capital, private equity, structural finance etc. Non funds
based financial services are those where intellectual property is used and advices are
offered. A fee or commission is charged for rendering services. The service sector in India
has been witnessing a boom in recent times. In addition to the strong growth in IT/ITES,
the Indian financial services sector is considered to be stable and progressive, and has been
a major beneficiary of India’s growth story.

The growing attractiveness of the financial services has triggered the entry of global majors.
Aggressive plans of incumbents coupled with the entry of new players are expected to
further drive the growth of sector. Liberalization, privatization and Globalization have further
strengthened the financial services in India.


Asset
reconstruction
companies

Non Banking
Banking -
Finance
Private Sector
Companies

Financial
Credit
Services
Banking -
Information
Public Sector
Companies

Commodity
Insurance
Exchanges


FDI Policy in Financial Services

(A) Asset Reconstruction Companies
‘Asset Reconstruction Company’ (ARC) means a % of FDI CAP/Equity: - 49% of paid
company registered with the Reserve Bank of up capital
India under Section 3 of the Securitisation and
Reconstruction of Financial Assets and
Route: - Government
Enforcement of Security Interest Act, 2002
(SARFAESI Act).

SARFAESI Act was famed with the purpose to regulate securitization and reconstruction of
financial assets and enforcement of security interest and for matters connected therewith or
incidental thereto.

As defined in the Act "asset reconstruction" means acquisition by any securitisation
company or reconstruction company of any right or interest of any bank or financial
institution in any financial assistance for the purpose of realisation of such financial
assistance;

Presently 49% of FDI is allowed in ARC under Government Route subject to following
conditions as mentioned below:

(i) Persons resident outside India, other than Foreign Institutional Investors (FIIs),
can invest in the capital of Asset Reconstruction Companies (ARCs) registered with
Reserve Bank only under the Government Route. Such investments have to be
strictly in the nature of FDI. Investments by FIIs are not permitted in the equity
capital of ARCs.

(ii) However, FIIs registered with SEBI can invest in the Security Receipts (SRs)
issued by ARCs registered with Reserve Bank. FIIs can invest upto 49 per cent of
each tranche of scheme of SRs, subject to the condition that investment by a single
FII in each tranche of SRs shall not exceed 10 per cent of the issue.

(iii)Any individual investment of more than 10% would be subject to provisions of
section 3(3) (f) of Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002.

Key Players in Market: - Arcil etc


(B) Banking –Private sector
Private
The Banking sector is most predominant sector in any financial system. FDI in private
banking sector is allowed upto 74% including investment by FIIs. Following are the further
ing including
conditions:

(1) The limit of 74% limit will include investment under the Portfolio Investment Scheme
(PIS) by FIIs, NRIs and shares acquired prior to September 16, 2003 by erstwhile OCBs,
and continue to include IPOs, Private placements, GDR/ADRs and acquisition of shares from
existing shareholders.

(2) The aggregate foreign investment in a private bank from all sources will be allowed up
e
to a maximum of 74 per cent of the paid up capital of the Bank. At all times, at least 26
per cent of the paid up capital will have to be held by residents, except in regard rega
to a wholly-owned subsidiary of a foreign bank.
owned

(3) The stipulations as above will be applicable to all investments in existing private sector
banks also.

Branches
A wholly-
owned
subsidiary

a subsidiary
-
Investment
74%

Foreing Banks in India


(4) The permissible limits under portfolio investment schemes through stock exchanges for
FIIs and NRIs will be as follows:

In case of FIIs

In the case of FIIs, individual FII holding is restricted to 10 per cent of the total paid-up
capital, aggregate limit for all FIIs cannot exceed 24 per cent of the total paid-up capital,
which can be raised to 49 per cent of the total paid -up capital by the bank concerned
through a resolution by its Board of Directors followed by a special resolution to that effect
by its General Body.FII investment limit is 49 per cent of the total paid-up capital.

In the case of NRIs

Individual holding is restricted to 5 per cent of the total paid-up capital both on repatriation
and non repatriation basis and aggregate limit cannot exceed 10 per cent of the total paid-
up capital both on repatriation and non-repatriation basis. However, NRI holding can be
allowed up to 24 per cent of the total paid-up capital both on repatriation and non-
repatriation basis provided the banking company passes a special resolution to that effect in
the General Body.

Private Bank with JV with Insurance sector

Applications for foreign direct investment (FDI route) in private banks having joint
venture/subsidiary in insurance sector may be addressed to the Reserve Bank of India (RBI)
for consideration in consultation with the Insurance Regulatory and Development Authority
(IRDA) in order to ensure that the 26 per cent limit of foreign shareholding applicable for
the insurance sector is not being breached.

Other conditions:

a) Transfer of shares under FDI from residents to non-residents will continue to require
approval of RBI and Government as applicable.

b) The policies and procedures prescribed from time to time by RBI and other institutions
such as SEBI, Department of Company Affairs and IRDA on these matters will apply as
applicable.

c) RBI guidelines relating to acquisition by purchase or otherwise of shares of a private bank,
if such acquisition results in any person owning or controlling 5 per cent or more of the
paid up capital of the private bank will apply to non-resident investors as well.


Setting up of a subsidiary by foreign banks

(a) Foreign banks will be permitted to either have branches or subsidiaries but not
both.

(b) Foreign banks regulated by banking supervisory authority in the home country
and meeting Reserve Bank’s licensing criteria will be allowed to hold 100 per cent
paid up capital to enable them to set up a wholly-owned subsidiary in India.

(c) A foreign bank may operate in India through only one of the three channels viz.,
(i) branches
(ii) a wholly-owned subsidiary and
(iii) a subsidiary with aggregate foreign investment up to a maximum of 74
per cent in a private bank.

(d) A foreign bank will be permitted to establish a wholly-owned subsidiary either
through conversion of existing branches into a subsidiary or through a fresh banking
license. A foreign bank will be permitted to establish a subsidiary through acquisition
of shares of an existing private sector bank provided at least 26 per cent of the paid
capital of the private sector bank is held by residents at all times.

(e) A subsidiary of a foreign bank will be subject to the licensing requirements and
conditions broadly consistent with those for new private sector banks.

(f)Guidelines for setting up a wholly-owned subsidiary of a foreign bank to be issued
separately by RBI.

(g) All applications by a foreign bank for setting up a subsidiary or for conversion of
their existing branches to subsidiary in India will have to be made to the RBI.

At present there is a limit of ten per cent on voting rights in respect of banking companies,
and this should be noted by potential investor.

Key Foreign Banks in India: - ABN AMRO, Bank of America, HSBC, Deutsche Bank, Citibank
India, Barclays Bank etc


(C) Banking- Public Sector

The FDI can be made subject to Banking Companies (Acquisition & Transfer of
Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India
and its associate Banks.

FDI limit is 20% (FDI and Portfolio Investment) through Government route.

(D) Financial Infrastructure in the Securities Market

Foreign investment is permitted in infrastructure companies in Securities Markets in
(a) Stock exchanges
(b) Depositories and
(c) Clearing corporations

The investment has to be done in compliance with SEBI Regulations and subject to the
following conditions:

(i) There is a composite ceiling of 49 per cent for Foreign Investment, with a FDI limit of 26
per cent and an FII limit of 23 per cent of the paid-up capital;
(ii) FDI will be allowed with specific prior approval of FIPB; and
(iii) FII can invest only through purchases in the secondary market.

(E) Commodity Exchanges

A commodity exchange is a place where various commodities and derivatives are bought
and sold. Commodities exchanges usually trade on commodity futures. Futures trading in
commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity
Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures
market. With a view to infuse globally acceptable best practices, modern management skills
and latest technology, it was decided to allow foreign investment in Commodity Exchanges.

The FDI allowed in the sector is 49% including the investment from FIIs. The other
conditions of investment are as follows:
1. Investment by Registered FII under Portfolio Investment Scheme (PIS) will be
limited to 23%
2. Investment under FDI Scheme shall be limited to 26%
3. The investment can be made though Government Route only
4. FII purchases shall be restricted to secondary market only and
5. No non-resident investor/ entity, including persons acting in concert, will hold more
than 5% of the equity in these companies.

Key players: National Commodity & Derivatives Exchange Limited (NCDEX), Multi
commodity exchange of India Ltd


(F) Credit Information Companies (CIC)

Credit information company means a company FDI Cap: - 49% (FDI & FII)
formed and registered under the Companies Act,
1956 (1 of 1956) and which has been granted a Route: Government
certificate of registration under sub-section (2) of
Section 5 of Credit Information Companies
(Regulation) Act, 2005.

“Credit information” means any information relating to—
(i) the amounts and the nature of loans or advances, amounts outstanding under
credit cards and other credit facilities granted or to be granted, by a credit institution
to any borrower;
(ii) the nature of security taken or proposed to be taken by a credit institution from
any borrower for credit facilities granted or proposed to be granted to him;
(iii) the guarantee furnished or any other non-fund based facility granted or
proposed to be granted by a credit institution for any of its borrowers;
(iv) the creditworthiness of any borrower of a credit institution;
(v) any other matter which the Reserve Bank may, consider necessary for inclusion
in the credit information to be collected and maintained by credit information
companies, and, specify, by notification, in this behalf;

Foreign Investment in allowed till 49% under approval route. Following are further
conditions:

1. Foreign investment is permitted under the Government route, subject to regulatory
clearance from RBI.
2. Investment by a registered FII under the Portfolio Investment Scheme would be
permitted up to 24% only in the CICs listed at the Stock Exchanges, within the
overall limit of 49% for foreign investment. Such FII investment would be permitted
subject to the conditions that:
(a) No single entity should directly or indirectly hold more than 10% equity.
(b) Any acquisition in excess of 1% will have to be reported to RBI as a
mandatory requirement; and
(c) FIIs investing in CICs shall not seek a representation on the Board of
Directors based upon their shareholding.

Players:-
(a) Credit Information Bureau of India Ltd (CIBIL)
(b) Equifax Credit Information Services [backed by Crisil and Tata Capital]
(c) Experian Credit Information Company of India [US based]
(d) Highmark Credit Information Services


(G) Insurance
The Insurance sector in India is regulated by INSURANCE REGULATORY AND DEVELOPMENT
AUTHORITY ACT, 1999. The objective of act is to provide for the establishment of an
Authority to protect the interests of holders of insurance policies, to regulate, promote and
ensure orderly growth of the insurance industry and for matters connected therewith or
incidental thereto and further to amended the Insurance Act, 1938, the Life Insurance
Corporation Act, 1956 and the General Insurance Business(Nationalisation) Act, 1972.There
have been lot of changes in the sector since it has opened for private participation in 2000
following the recommendations of the Malhotra Committee report. Presently FDI upto 26%
is allowed under automatic route. Other conditions are as follow:

(1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1999, is allowed under
the automatic route.

(2) This will be subject to the condition that Companies bringing in FDI shall obtain
necessary license from the Insurance Regulatory & Development Authority for undertaking
insurance activities.

List of Private Companies in Life Insurance

Name of the Private Life % of Name of the Foreign
Insurance Foreign partner
Company Equity

Allianz Bajaj Life Insurance 26 Allianz
Co. Ltd.
Birla Sun Life Insurance Co. 26 Sunlife
Ltd.
HDFC Standard Life 18.60 Standard Life
Insurance Co.
Ltd.
ICICI Prudential Life 26 Prudential
Insurance Co.
Ltd.
ING Vysya Life Insurance Co. 26 ING
Ltd
Max New York Life Insurance 26 New York Life
Co.
Ltd.
MetLife India Insurance Co. 25.99 Metlife
Ltd.
Om Kotak Mahindra Life 26 Old Mutual
Insurance
Co. Ltd.

26 Cardiff
SBI Life Insurance Co. Ltd.


List of Private Companies in General Insurance

Name of the Private % of Name of the
General Foreign Foreign partner
Insurance Company Equity
Royal Sundaram Alliance 26 Royal Sun Alliance
Insurance
Co. Ltd
ICICI Lombard General 26 Lombard
Insurance
Co. Ltd
IFFCO-Tokio General 26 Tokio Marine
Insurance Co.
Ltd
Tata-AIG General Insurance 26 AIG
Co. Ltd


(H) Non-Banking Finance Companies (NBFC)
Foreign investment in NBFC is allowed under the automatic route in the following activities:

1. Merchant Banking
2. Under Writing
3. Portfolio Management Services
4. Investment Advisory Services
5. Financial Consultancy
6. Stock Broking
7. Asset Management
8. Venture Capital
9. Custodian Services
10. Factoring
11. Leasing & Finance
12. Housing Finance
13. Forex Broking
14. Credit Card Business
15. Money Changing Business
16. Micro Credit
17. Rural Credit

Minimum capitalization norms for Fund based Activities

FDI Limit Minimum capitalization Capital Infusion
requirement
Foreign capital upto 51% US $0.5 million to be brought upfront
Foreign capital more than US $ 5 million to be brought upfront
51% and upto 75%
Foreign capital more than US $ 50 million US$ 7.5 million to be
75% brought upfront and the
balance in 24 months.

100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up
step down subsidiaries for specific NBFC activities, without any restriction on the number of
operating subsidiaries and without bringing in additional capital.
Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can
also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries
also complying with the applicable minimum capitalisation norm mentioned above.

Minimum capitalization norms for Non Fund based Activities

FDI Limit Minimum capitalization Capital Infusion
requirement
For all permitted non- US $0.5 million upfront
fund based NBFCs
irrespective of the level
of foreign investment


NBFC with Non- Fund based activities would not be permissible for such a company
to set up any subsidiary for any other activity, nor it can participate in any equity of
an NBFC holding/operating company.
(vii) This will be subject to compliance with the guidelines of RBI.

Investment
advisory
Services

Credit rating Financial
Agencies Consultancy
Non-Fund
Based
activities

Money
Forex
Changing
Broking
Business

(2) Venture Capital Fund (VCF)

A Foreign Venture Capital Investor (FVCI) may contribute up to 100% of the capital of an
Indian Venture Capital Undertaking and may also set up a domestic asset management
company to manage the fund. All such investments can be made under automatic route in
terms of Schedule 6 to Notification No. FEMA 20.

A SEBI registered FVCI can also invest in domestic venture capital fund registered under the
SEBI (Venture Capital Fund) Regulations, 1996. Such investments would also be subject to
RBI regulations and FDI policy. However, in case the entity undertaking venture capital fund
activity is a Trust registered under the Indian Trust Act, 1882, FDI would be permitted
under the Government route. FVCIs are also allowed to invest in other companies subject to
FDI Regulations.


Indian financial Service Sector – Growth and opportunity
India is the largest democracy and 4th largest economy in the world. With its consistent
growth performance and abundant high skilled man power, India provides enormous
opportunities for investment, both domestic and foreign. Since the beginning of reforms in
1991, major reform initiative has been taken in the field of investment, trade, financial
sector, exchange control simplification of procedure. India provides liberal, attractive and
investor friendly investor.

The Financial Services sector in India has emerged as a mature and sophisticated system.
System which is inherently strong, functionally diverse and displays efficiency and flexibility.
This is a sector which is further expected to witness increasing consolidation, sophistication
and maturity in future. As compared to other developed markets, the Indian financial
services sector is largely under penetrated with a huge potential for growth keeping in
consideration government thrust on liberalization on one side and rising income, increasing
awareness of financial products, strong equity market growth on the other.

Indian Financial Services sector provides very promising investment for global investors.
Backed by favorable regulatory reforms and institutional framework, robust earning of the
corporate sector and a booming capital market, favorable demographics with a growing
consumer and investor class, increased saving in the economy channelised into the creation
of productive assets. In Financial year 09 the contribution of financial services sector to
India's GDP was 15% which is the second-largest component after trade, hotels, transport
and communication all combined together[as per the Banking & Finance Journal, released
by an FICCI in August 2010].

The robust financial services sector and vibrant Indian Economy have given birth
to plethora of emerging opportunities which are expected to gain prominence in
the long term based on regulatory and market developments.


DISCLAIMER

The analysis/views in this booklet do not purport to be and should not be treated as legal
opinion.
****

In case of clarification please

Contact at:

+ 091 9769033172

Email at:
sudhag999@gmail.com
sudha.gupta@icai.org

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