Financial sector of India

1. Exploring India’s Financial
Sectors
Roles, Merits & Demerits
By: Ayushi Tyagi

2. Banking Sector - Introduction
• The banking sector comprises institutions that
accept deposits, provide loans, and offer
financial services. It plays a vital role in
economic growth and is regulated by the
Reserve Bank of India (RBI).

3. Banking Sector - Merits & Demerits
• Merits and Demerits:
• Encourages savings and investment
• Provides credit to individuals and businesses
• Supports economic development
• Advances digital banking services
• ---
• High levels of Non-Performing Assets (NPAs)
• Interest rate volatility
• Limited rural penetration

4. Insurance Sector - Introduction
• The insurance sector provides risk coverage to
individuals and businesses. It includes life and
general insurance and is regulated by the
Insurance Regulatory and Development
Authority of India (IRDAI).

5. Insurance Sector - Merits &
Demerits
• Merits and Demerits:
• Risk protection for life and assets
• Encourages long-term savings
• Contributes to capital market
• ---
• Low insurance awareness in rural areas
• Policy mis-selling risks

6. Capital Markets - Introduction
• Capital markets enable companies to raise
funds through the issuance of stocks and
bonds. They include primary and secondary
markets and are regulated by SEBI.

7. Capital Markets - Merits &
Demerits
• Merits and Demerits:
• Wealth creation through investments
• Liquidity for investors
• Access to capital for businesses
• ---
• Market volatility
• Investor risk due to lack of knowledge

8. NBFCs - Introduction
• Non-Banking Financial Companies (NBFCs)
offer financial services similar to banks but do
not hold a banking license. They cater to
segments underserved by banks.

9. NBFCs - Merits & Demerits
• Merits and Demerits:
• Reach in rural and semi-urban areas
• Flexible credit solutions
• ---
• Lack of strong regulatory oversight
• Higher borrowing costs

10. Mutual Funds - Introduction
• Mutual funds pool money from investors to
purchase diversified portfolios of securities.
They are managed by Asset Management
Companies (AMCs).

11. Mutual Funds - Merits & Demerits
• Merits and Demerits:
• Diversification of risk
• Professional fund management
• Low investment threshold
• ---
• Subject to market risks
• Management fees reduce returns

12. Pension Funds - Introduction
• Pension funds manage retirement savings and
provide financial security post-retirement.
Examples include EPF and NPS in India.

13. Pension Funds - Merits & Demerits
• Merits and Demerits:
• Long-term financial security
• Tax benefits
• ---
• Limited access to funds before retirement
• Returns may be lower than market-linked
options

14. Fintech - Introduction
• Fintech refers to technology-driven financial
services, including UPI, mobile wallets, robo-
advisors, and peer-to-peer lending.

15. Fintech - Merits & Demerits
• Merits and Demerits:
• Faster transactions
• Improved financial inclusion
• Lower operational costs
• ---
• Cybersecurity risks
• Digital literacy gaps

16. Microfinance - Introduction
• Microfinance provides small loans and
financial services to low-income individuals
and small businesses, often via SHGs and
NGOs.

17. Microfinance - Merits & Demerits
• Merits and Demerits:
• Promotes entrepreneurship
• Supports women empowerment
• Boosts rural economy
• ---
• Risk of over-indebtedness
• High interest rates for borrowers

18. Sources
• https://www.rbi.org.in/
• https://www.irdai.gov.in/
• https://www.sebi.gov.in/
• https://www.nseindia.com/
• https://www.bseindia.com/
• https://www.amfiindia.com/
• https://www.npscra.nsdl.co.in/
• https://www.investopedia.com/