The financial sector in India has grown significantly in recent years and includes banking, insurance, capital markets and other non-banking financial institutions. Banking has expanded with new branches and ATMs, while the insurance sector is growing rapidly led by life insurance. The capital markets have also increased in size and importance with the primary market helping companies raise funds and the secondary market seeing increased trading volumes. Overall the financialization of the Indian economy has accelerated and further reforms are expected to make the sector more effective in allocating resources and supporting economic growth.

1. Present Trends ofFinancial Sector in India

3. Suresh Mahala

4. Vivek Sethiya

5. Nitin Kirnapure

6. Nikhil Mayur

8. Financial Sector Continued… Financial Sector Includes Financial Services : Capital Market Forex Market Asset Management NBFCs (Non-Banking Financial Institutions) MFIs (Microfinance Institutions) Banking Sector Insurance Sector

9. Governing & Regulatory Bodies Ministry of Finance Ministry of Corporate Affairs RBI (Reserve Bank of India) SEBI (Security & Exchange Board of India) IRDA (Insurance Regulatory and Development Authority) AMFI(Association of Mutual Funds in India) IDRBT (Institute for Development and Research in Banking Technology) IBA (Indian Banks’ Association)

10. Insurance Sector

11. What is INSURANCE? Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium.

15. Motor insurance

16. Travel insurance

17. Home insurance

18. Property (building risk insurance)

22. In Rs. Cr.

24. (JV with foreign insurer)

25. 4 public sector companies – multiline

26. 2 private sector companies – health

27. 2 public sector specialty companiesmarket share of 40% was contributed by the private players and remaining 60% came from the four public sector players — New India, Oriental Insurance, National Insurance and United India. Premium Grew at 19.5% per annum

32. Indian Insurance Sector Project Insurance Insurance companies are also witnessing increasing demand for project insurance in the last few months. Corporates are beginning to demand project insurance across sectors such as power generation with the cover beginning right from the start of the project till it is declared ready for commercial use. Premiums collected from project insurance will be around US$ 216.2 million Oriental Insurance Company Ltd will be offering comprehensive project insurance for the Tata Power Project at Mundra in Gujarat.

33. Health Insurance 2nd largest contributor to general insurance premiums after motor insurance The health insurance market stood at around us $ 1.5 billion in 2008-09 and is expected to grow to us $ 9 billion by 2016-17. While health insurance policies are mostly provided by general insurance companies, life insurers contribute about five per cent to the overall health insurance business. During April-September 2008 (latest provisional figures), it again shows 47% growth over the corresponding period in the previous year.

34. Global Health Expenditure

35. Performance in half year periodGross Premium (April-September) 2008-09 v/s 2007-08 MOTOR INSURANCE Two coverage: Own Damage (OD) policies cover physical damage to own vehicle and is an optional coverage Third party (TP) policies cover bodily injury and collision and is mandated by law Comprehensive policies cover both OD and TP

38. Future of Indian Insurance Market Indian Insurance Sector ready to tap Rural India A large part of rural India is still untapped due to poor distribution, large distances & high costs relative to returns the study had revealed that rural & semi-urban India would contribute 35 billion $ to the Indian insurance industry by 2010. Assocham stated that semi-urban areas would have a share of US$ 35 Billion and urban areas would account for US$ 25 Billion in the US$ 60 Billion industry. Life insurance market in semi-urban and rural territories is expected to rise to US$ 20 Billion mark in the upcoming four years from the existing value of less than US$ five Billion. Non-life insurance business in semi-urban and rural regions would reach to US$ 15 Billion by 2010 while the corresponding value for the urban area is US$ 10 Billion.

39. Banking Sector

40. Introduction India Banking 2010 Towards a High-performing Sector Banks :- Financial institutions whose current operations consist of accepting deposits from the public and issuing loans. One of India's key economic strengths is a dynamic financial sector, which has played a vital role in partnering growth

43. Growth Drivers for Banking System Rising literacy rate, specially in rural India, has increased the need for banking.

44. Growth Drivers for Banking System Large number of micro, small and medium enterprises (MSMEs) with significant growth opportunities in their respective sectors. Large amount of money is remitted by NRI. Stringent regulatory framework like RBI Adoption of best practices from other countries Retail Banking Technological Development for Core Banking

46. Recent Trends in Banking Sector cont…

48. Trends in Banking Sector in 2009-10 India has a well diversified financial system which is dominated by banking industry and it’s a well regulated sector. In India, the banking sector has largely influenced the growth of the financial markets. Banking industry growth rate is 15-20% in 2009-10 and it is expected that this sector will grow by @20% growth rate till 2014-15. Bank credit grew by 16.7% in 2009-10. Till 2010 market penetration by Banking sector is 37% of population. Less penetration in Rural Area.

49. Recent Trends in Banking Sector cont…

52. Some Major steps taken by Govt. Reserve Bank of India hiked its key policy rates. Cibil Detect – a nationwide database of reported fraudulent and suspect activities Instant interbank mobile payment service (IMPS) - that will enable retail customers of seven banks to enjoy 24X7 funds transfer.

53. Progress of Banks in India: At A Glance 169 ‘scheduled commercial banks’ (SCBs), with a network of 82,511 branches. 14000 Branches and 41000 ATM’s were added in last decade. In the annual international ranking, 20 Indian Banks are in Top 500. SBI is in Top 50 and ICICI in Top 100.

55. Risk management systemsmore advanced than China, Brazil and Russia.

56. Credit quality of banks has been rated above par than China, Brazil, Russia, UK and USA but at par with Hong Kong and Singapore.

58. Mobile Banking,

59. SMS Banking and

60. Net Banking

62. Problem In Banking Sector

63. Financial Services

66. Capital Market A Capital Market is a market for Securities (debt or equity), where business enterprises (companies) and governments can raise long-term funds.

67. Primary Market The Primary Market is that part of the capital markets that deals with the issue of new securities Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue for Growth & Expansion IPO (Initial Public Offering) FPO (Follow-on Public offering) Rights Issue (existing shareholders have the privilege to buy a specified number of new shares from the firm at a specified price within a specified time)

68. PCD – Partially Convertible Debenture FCD – Fully Convertible Debenture NCD – Non-Convertible Debenture

71. Primary Market Continued… The largest mega issue during 2009-10 was of a Public Sector Undertaking (PSU) NMDC(National Mineral Development Corporation) Limited FPO(Rs.9,967.3 crore) NTPCLtd FPO(Rs.8,478.8 crore) NHPCLtd IPO(Rs.6,038.6 crore) CoalIndiaLimited IPO(15,475.09 crore) PowerGridCorporation of India Ltd FPO(7442.34) For FPO in PSU was part of Government of India’s Disinvestment Plan to reduce fiscal deficit.

72. Secondary Market The Secondary Market, also known as the Aftermarket, is the financial market where previously issued securities and financial instruments such as Stock, Bonds, Options, and Futures are bought and sold. Equity Market in India Equity markets witnessed significant uptrendduring 2009-10 as compared to downward and volatile trend in 2008-09. Uptrend in 2009-10 is driven by higher growth rate, positive sentiments in market, better global environment, and FII inflows.

74. Turnover at BSE and NSE: Cash Segment

75. Capitalization Trend at NSE & BSE

76. Trends in Bond Market BSE – Increase in volume of trade is 42.9% NSE – Increase in volume of trade is 206.9%

77. Wholesale Debt Market WDM deals in Fixed income securities like G-Sec, T-Bills, PSU Bond, Commercial Papers, etc.

78. Instrument-wise Share of Securities Traded in the Wholesale Debt Market Segment of NSE

79. Trends in Equity Derivative market Derivative is dominated by NSE, which has a share of more than 99% of the total turnover. During 09-10, turnover of derivative market was 4.6 times of the cash turnover on all India equity exchanges. The average daily turnover at NSE in 09-10 increased by 59.1% compare to 08-09. The open interest in derivative segment increased by 68.9% in 09-10.

81. Continued… Earlier derivative segment is used to dominate by Futures in general and single stock Futures with 86% share, but now in last couple of years picture has been changing in favour of Index Options.

82. Product wise share Currently product wise share in the open interest shows that the notional value of outstanding contracts was the highest for the Index options, followed by single stock future, Index futures and stock options.

83. Trends in Currency Derivative market Currency Future trading commenced in India on Aug 29, 2008 at NSE. Later MCX-SX and BSE were also granted permission. During 09-10, total turnover was the highest at MCX-SX, followed by NSE and BSE(negligible).

84. Continued… At NSE, the share of top 10 members in volume of currency derivative segment increased to 72.1% at the march 2010 from 56.8% at the march 2009. Their share in open interest is registered growth of 1%, i.e. it is stable. In BSE, the share of top 10 members in volume and open interest fell to zero after being 100% in May 2009.

85. Bid-Ask spread A narrow Bid Ask means that the cost of entering and exiting a trade are low, a liquid market requires the Bid ask spread to be narrow. 95% of trading at NSE and 99% of MCX-SX in USD-INR futures takes place at narrow bid ask spread of less than or equal to half a paisa as against 7 paisa for OTC currency forward market.

86. Currency Options The RBI-SEBI Standing Technical Committee is working on the operational framework for introduction of exchange traded currency options on USD-INR currency pair. Currently currency options are traded in the OTC Market. Where banks are playing role as market player.

87. Trend in Interest Rate Derivatives Trading in 10 year Notional coupon bearing GoI(Govt. Of India) security Futures started at NSE on Aug 31, 2009. It shows the trend of volatility.

88. Mutual Funds A Mutual Fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities (stocks, bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals) The mutual fund will have a fund manager that trades (buys and sells) the fund's investments in accordance with the fund's investment objective. Mutual funds play an important role in mobilising the household savings for deployment in capital markets.

90. Microfinance Institutions (MFIs) In India, most microfinance loans are between US$ 100 (INR 4,800) and US$ 415 (INR 20,000). In 2009, about 230 microfinance institutions added 8.5 million borrowers, taking the total number to 22.6 million. Microfinance institutions exist in many legal forms such as trusts, societies, non-profit companies and NBFCs.

91. Opportunities

92. References RBI Report India Brand Equity Foundation SEBI Report IRDA Report FICCI Report AMFI Report Ministry of Finance Website Wikipedia Economic Times

93. Thank You