India’s Leading BFSI Companies 2017


Dun & Bradstreet India is proud to announce the launch of the ninth edition ‘India’s Leading BFSI Companies’, one of its premier publications. The publication provides useful information about the leading companies from the Indian BFSI (banking, financial services, and insurance) sector. Apart from highlighting the recent developments and key trends in the sector, it also features the major BFSI companies in the country.

FY16 was a challenging year in terms of financial stability, especially for emerging market economies (EMEs). Most EMEs witnessed severe domestic imbalances as a result of economic stress, and a slowdown in credit growth. However, India outperformed its EME peers in terms of economic growth, with its GDP at constant prices (2011-12) having grown by 7.6% in FY16. The Indian BFSI sector had a mixed performance in FY16. On one hand, its banking sector was weighed down by rising NPAs. All scheduled commercial banks in India saw a deceleration in the growth of both, credit as well as deposits as compared to FY15. On the other hand, however, the aggregate balance sheet of NBFCs grew at a healthy rate. The insurance sector, both the life as well as non-life segments, also witnessed a healthy growth in premiums. During the year, the mutual funds sector managed to breach the Rs. 12 trillion mark in terms of average assets under management.

There were some major developments in FY16 that promise to shape the financial landscape in the years to come. One of them was the in-principle approval for the setting up of payments banks. The release of guidelines for on tap licensing of universal banks in the private sector will promote competition in the banking sector and also help enhance financial inclusion. The government’s push for digitisation has resulted in technology being leveraged for the delivery of financial services, and has also led to the emergence of new innovative services. For instance, the launch of the Unified Payments Interface promises to revolutionize retail payments. More recently, the government’s demonetisation drive will lead to an improvement in the liquidity levels of banks and will reduce the cost of funds. The government’s plans to improve financial inclusion are also showing good progress. These are only some of the developments that all augur well for the Indian BFSI sector.

Dun & Bradstreet is extremely optimistic about the rapid growth of the Indian BFSI sector. We are confident that the publication ‘India’s Leading BFSI Companies 2017’will serve as a ready reckoner on the Indian BFSI sector. I hope you will enjoy reading ‘India’s Leading BFSI Companies 2017’ and welcome your suggestions and feedback.

Kaushal Sampat
President & Managing Director – India
Dun & Bradstreet


Dun & Bradstreet India takes pleasure in announcing the launch of the ninth edition of its premier publication – ‘India’s Leading BFSI Companies’. Through this publication, Dun & Bradstreet seeks to provide useful and comprehensive information about the leading companies from the BFSI (banking, financial services, and insurance) sector. Additionally, it also highlights the recent developments and key trends in the sector.

The BFSI sector plays a critical role in driving the country’s economy by providing a diverse range of financial and allied services to the largely diversified demographic spectrum of the country. Its importance in the socio-economic landscape is underscored by the fact that this sector will require a skilled workforce of 1.6 million by the year 2022.

The recent demonetisation announcement has led to improved liquidity levels in the financial sector, especially in the banking industry. The increased liquidity, in turn, is expected reduce the cost of funds. Further, the impending reduction in cash transactions is also expected to result in a shift towards digital channels like digital wallets, debit and credit cards and User Payment Interface for financial transactions. Accordingly, we are currently witnessing a very dynamic environment in the BFSI sector in terms of innovation, high competition, consolidation, and increasing use of alternative multiple channels to name a few.

In India, the market for the BFSI sector is still largely untapped. Digital technology, which has transformed the way business is conducted across the world, is expected to be one of the major drivers for the growth of this sector in India as well. A wide range of financial products are increasingly being sold and delivered using the electronic platform to millions of customer in India. Greater use of digital technology is helping the BFSI sector to lower the cost of transaction and bring higher efficiency and greater reach in the financial ecosystem. In the current scenario where the Government seeks to reduce the economy’s dependence on cash, the increased focus on tech-adoption promises to take the BFSI sector on a path of rapid growth.

‘India’s Leading BFSI Companies 2017’ stands as a ready reckoner on the Indian BFSI sector. Dun & Bradstreet is extremely optimistic about the progress of this sector and reiterates its commitment to continue tracking it to facilitate making informed business decisions. I hope you will enjoy reading ‘India’s Leading BFSI Companies 2017’ and look forward to your suggestions.

Preeta Misra
Director - Learning & Economic Insights Group
Dun & Bradstreet India

Executive Summary

Dun & Bradstreet, the world’s leading provider of business information, knowledge, and insight, has been tracking the banking, financial services and insurance (BFSI) sector for the past eight years through its publication titled ‘India’s Leading BFSI Companies’. The ninth edition, in this series, ‘India’s Leading BFSI Companies 2017’ highlights the contribution of key stakeholders of the BFSI sector across India and the growth of the sector. The publication profiles the leading players of the BFSI sector with an annual total income of Rs. 250 million and above in FY16. Accordingly, the publication profiles 303 companies – comprising 88 banks, 119 non-banking financial companies, 53 insurance companies (life and non-life), 24 asset management companies and 19 broking companies.

Following are some of the key highlights in this publication:-

  • Credit growth of all scheduled commercial banks (SCBs) slowed down to 8.8% in FY16 from 9.7% in FY15. Similarly, the deposit growth rate of all SCBs decelerated to 8.1% in FY16 as compared to 10.7% in FY15
  • The aggregate balance sheet of the NBFC sector increased by 15.5 % in FY16 on a y-o-y basis as compared to that of 15.7 % in March 2015
  • In FY16, the total premium income of the Indian life insurance industry stood at Rs. 3,669.4 bn, registering a growth of 11.8% over the previous year
  • In FY16, the total direct premium underwritten by the non-life insurers in India stood at Rs. 963.8 bn as against Rs. 846.9 bn in FY15, registering a growth of 13.8%
  • In the mutual funds industry, the average assets under management (AAUM) crossed the Rs. 12 trillion mark at the end of FY16

The BFSI sector is witnessing a very positive environment on the back of government reforms and high level application of financial technology. The leading companies from the BFSI sector are expected to play a critical role in transforming the nation into a digital economy. Dun & Bradstreet will continue to keep track of various developments in this sector to make this publication a ready reference tool of the BFSI sector.

Naina R Acharya
Deputy Leader - Operations
Learning & Economic Insights Group
Dun & Bradstreet India


For the purpose of the publication, ‘India’s Leading BFSI Companies 2017’, the BFSI sector has been divided into the following key segments – banking i.e. scheduled commercial banks (SCBs) based on the RBI enumeration of SCBs as on Mar 2016; companies providing financial services falling under NIC Codes 64, 65 & 66; asset management companies as registered with Association of Mutual Funds in India (AMFI); and insurance companies that are registered with Insurance Regulatory and Development Authority (IRDA), in accordance with the Insurance Act, 1938.

Adequate measures are undertaken, such as an advertisement in the ‘All India’ edition of a prominent business daily, to ensure that the publication covers most companies from the BFSI sector from across the country. In addition, emails and social networking was also entailed for reaching out to Dun & Bradstreet India’s in-house database and companies registered with the respective regulatory bodies and industry associations. To ensure that all the information contained in this publication is verified and authenticated, companies that have not responded with financials statements, and/or their information is not available in public domain are excluded. In addition, if the annual reports of companies are not available to Dun & Bradstreet at the time of compiling this publication, then those companies have also been excluded.

As a basic selection criterion, companies with a standalone total income of Rs. 250 mn and above in FY16 are featured in this publication. Further, subsidiaries and associate companies satisfying the eligibility criteria have also been featured. We have also considered additional exclusion criteria of the corporate governance record (with a focus on NBFCs, FIs, Financial Services & Broking Companies) and NBFCs whose certificate of registration was cancelled by RBI (as on 15 Dec 2016) while compiling this publication to arrive at the final list of ‘India’s Leading BFSI Companies 2017’ . Audited financial statements considered were for the period July 31, 2015 and June 30, 2016 have been used as the source of information for this publication. The various financial computations are based on Dun & Bradstreet’s methodology and have been explicitly explained in the ‘Definitions and Calculations’ section. For companies where the published financial statement is for a period other than 12 months, the financials are annualized for the sole purpose of shortlisting and profiling. In general, all information used in the publication is from publically available sources. Financials of the companies have been sourced from annual reports or financial statements or regulatory authorities (IRDA, RBI, and AMFI). In case of certain subsidiaries, financials have been procured from annual reports of their respective parent companies.

Information pertaining to SCBs has been primarily sourced and compiled from RBI, annual reports (ARs) and websites of banks. Information related to financials and infrastructure of the banks has been taken purely from various publications provided by the RBI and pertains to March 2016.

The information pertaining to financial services companies, insurers and AMCs have been sourced and compiled from -

  • Questionnaires circulated and administered by Dun & Bradstreet India;
  • Data provided by the respective regulatory authority (IRDA and AMFI) through its websites and various publications;
  • Data available from respective companies’ website and ARs/financial statements, draft red herring prospectuses;
  • Government of India websites such as Reserve Bank of India, Securities and Exchange Board of India, Economic Survey etc.

The total income pertaining to insurance companies has been calculated by taking financials from the annual reports and public disclosures of respective insurers. Other financial information pertaining to insurers has been taken from IRDA’s FY16 AR. The Quarter Ended AAUM pertaining to AMCs has been considered from AMFI while other financial information is taken from their respective ARs/financial statements. The financial information for financial services companies, NBFCs, FIs, broking companies have been taken from ARs/Financial Statements.

A standardized format has been used for reporting the information about the companies. The editorial team would appreciate if readers would keep Dun & Bradstreet India regularly updated regarding any changes in their companies, as and when it occurs. Each company featured in the publication has been allotted a unique identification number (D-UN-S® - Data Universal Numbering System). This will help readers locate and obtain full-fledged informative reports on these companies from the Dun & Bradstreet India database.

The editorial team is confident that ‘India’s Leading BFSI Companies 2017’ will prove a useful reference tool for information on the BFSI sector. We would be pleased to receive your invaluable feedback and suggestions, which we can incorporate in the next edition.

Definitions & Calculations


  • Total Advances = Bills purchased & discounted (Short term) + Cash credits, overdrafts & loans (Short term) + Term loans
  • Total Deposits = Demand Deposits + Savings Bank Deposit + Term Deposits
  • Total Business = Total Deposits + Total Advances
  • Net Profit Margin (NPM) = Net Profit/Total Income*100
  • Total First Year Premiums (FYP) = FYP + Single Premiums
  • Total Income for Insurance companies = Premiums earned - net (policy holder’s account) + Income from Investments (policy holder’s account) + other income (policy holder’s account) + income from investments (shareholders account) + other income and miscellaneous receipts (shareholders account)

Data Sources

  • Total Income for banks taken as per RBI and for other companies as per the ARs/Financial Statements/Public Disclosures
  • Net Profit/Loss for banks taken as per RBI and for other companies as per the ARs (except for Insurance companies)
  • Total Deposits, Total Advances, CRAR - Basel III and Net NPA/Net Advances Ratio for banks taken as per RBI
  • AAUM (Quarter Ended) of asset management companies taken from Association of Mutual Funds in India (AMFI) as per data disclosed by the AMCs - (Excluding Fund of Funds - Domestic but including Fund of Funds – Overseas) + (Fund of Funds – Domestic)
  • Net Premium Earned, AUM and Solvency Ratio of Life Insurance companies taken as per the data from ARs/Financial Statements/Public Disclosures, FY16 AR of Insurance Regulatory and Development Authority
  • AUM, Solvency Ratio and Incurred Claims Ratio of Non-life insurance companies taken as per the data from FY16 AR of Insurance Regulatory and Development Authority
  • Net Premiums Earned of Non-life insurance companies taken as per ARs/Financial Statements/Public Disclosures

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Alphabetical Listing

Search Company

Sr.NoCompany NameSectorTotal Income
Rs.(In Cr)
Net Profit
Rs.(In Cr)
Net Profit Margin
Rs.(In Cr)
1 Agriculture Insurance Company of India Limited Insurance20069.71680.5 
2 Air India Air Transport Services Limited Non-Financial Segment6532.4675.910.3
3 Air India Charters Limited Non-Financial Segment22949.7-610.3-2.7
4 Air India Limited Non-Financial Segment206131.6-58530.2-28.4
5 Airline Allied Services Limited Non-Financial Segment2279.5-1885.7-82.7
6 Airports Authority of India Non-Financial Segment92849.819592.221.1
7 Allahabad Bank Banks217121.36209.0 
8 Andhra Bank Banks178684.56384.4 
9 Andrew Yule & Company Limited Non-Financial Segment4021.4129.63.2
10 Antrix Corporation Limited Non-Financial Segment18607.12046.311.0
11 Artificial Limbs Manufacturing Corporation of India Non-Financial Segment1728.5316.518.3
12 Balmer Lawrie & Company Limited Non-Financial Segment28157.81474.45.2
13 Bank of Baroda Banks473655.533984.4 
14 Bank of India Banks476626.117089.2 
15 Bank of Maharashtra Banks136714.24506.9 
1 2 3 4 5 Last

Bajaj Allianz General Insurance Company Limited

Growing financial literacy has placed the Indian Insurance sector on a growth trajectory. What are your views on opportunities in the Indian insurance industry?
The growth in the Indian Insurance sector and the new opportunities cannot be solely attributed to the growing financial literacy. Many factors such as the advent of digital revolution, changing consumer demographics and several new initiatives by the government that are fueling growth and consumption in the economy have had an impact on the industry’s performance. Given that insurance still remains a highly under penetrated market in our country, digitization has helped the industry reach the last mile in a cost-effective manner.

The changing customer behavior patterns and a demographic drift to a younger generation of consumers that has information at finger tips - the balance of power is now shifting to the customers, across all B2C industries, and insurance is no different. This shift is already fostering innovations in product/service design and delivery. The insurance industry is also expected to embrace the latest technologies for risk management and claim settlement.

The recent industry developments like the move to list public sector insurers will ensure that profitability of insurance companies will now take center stage and pricing would be made more sustainable through risk based underwriting. It is also expected that the government along with the regulator will continue working towards bringing out more affordable insurance schemes in association with insurers to increase insurance access and extend the financial security net to the masses especially in the tier 2 and 3 cities and other rural areas. This collaboration between the center and the industry will further propel the growth story..

The Indian government is increasingly focusing on adoption of digital technologies in the financial industry. What is your outlook on the adoption of digital technologies over the next five years, especially with respect to insurance?
If we look at the last 5 years of digital transformation, apart from infusing technology to enhance operational efficiencies insurers have been able to create digital offices and move away from the traditional brick and mortar model. Digital technologies have helped improve the service capabilities manifold by providing platforms to empower customers to perform insurance related transactions instantaneously at their own convenience whilst allowing insurers to offer services at the customer’s doorstep, producing more sophisticated & robust techniques for fraud detection.

The industry today is at the cusp of a revolution as technology enables it to move from reactive to preventive business model. Connected devices, sensors and Internet of things (IoT) based solutions are allowing insurers to develop usage based insurance offering and are facilitating effective risk management. Bajaj Allianz General Insurance set up the platform for usage based insurance in India by launching Drive Smart, a connected device that offers real time feedback on driving behavior and rewards good driving behavior. The real time data ensures greater availability of lifestyle, behavioral and medical data at the insurer’s disposal. This will lead to the development of automated underwriting model by the use of predictive analysis in almost all lines of business. . The use of technology will also see a greater impact in the claims process, making it more efficient & fast.

In your opinion, what additional measures could be undertaken by the government/ regulator to support the growth of the Indian insurance industry?
The role of government and regulator would be instrumental in addressing two pressing issues. One is the rising health care costs that have made it very difficult for a common man to access affordable, but quality health care financing options. To address this issue, the government can look at making it mandatory for employers, both in organized and the unorganized sector, irrespective of the number of employees, to provide health cover to everyone working for them. Besides, a national health scheme by the government especially for those from the underprivileged sections of the society would ensure that a sizeable population is covered against unforeseen medical exigencies

The second issue pertains to the huge financial losses arising due to incidents of catastrophes in the country. The last few years have seen the damages caused by floods in Chennai, J&K, Uttrakhand or the HudHud Cyclone.

With the priority always being on financial protection in case the earning member of the family dies or someone in the family meets with an accident, the often overlooked fact is that what takes several news of hard work to be created can get washed away in matter of minutes due to nature’s fury. In order to cover the population at large against natural disasters, the government can look at offering affordable home insurance scheme in association with insurance companies that would cover losses to property due to catastrophic events. An index based policy similar to the weather based crop insurance schemes, which will compensate for the damage caused by the natural catastrophe.

A combination of these measures will ensure that that citizens have access to good health care and their assets, a result of years of hard work, does not get wiped away.

Brief us about your company’s new product launches planned for the current year?
In the coming year the focus will be towards offering customized solutions and transforming their claim experience with the company. While we are looking at introducing new easy to understand products in the health, home and travel space that can be bought easily through online and mobile channels, we are also looking at launching a facility that will enable customers to settle their own claims within minutes. The coming year will see usage based insurance solutions in the health and home space using connected devices. There is going to be a high focus on promoting wellness and preventive care. The company is also looking at addressing the new age risks that individuals are exposed too and is looking at coming out with suitable solutions. For instance, given that today we are extremely vulnerable to cyber related crimes, the company is looking at introducing cyber insurance covers that offers protection to both individuals and businesses.

What is Bajaj Allianz General Insurance’s strategy for expansion and growth over the next five years?
The company’s vision for the next 5 years is to reach the remotest corners of the country to improve awareness on insurance a very important component of an individual’s financial security via various digital initiatives. Our energies are focused on strengthening our home and health insurance portfolios as well as distribution capabilities. While we look at sustainable growth our product and innovation labs will continue to churn out simple need based covers and digital interfaces. These interfaces will offer simplicity, speed and convenience to our customers and partners in their interactions as well as insurance transactions. As insurers we want to establish a clear leadership in engaging with our customers beyond insurance by being a part of their wellness cycle and assisting them in effective risk management.

Canara HSBC Oriental Bank of Commerce Life Insurance Company

Kindly brief us on Canara HSBC OBC Life Insurance’s bancassurance model. What are the key factors that have contributed to the success of the bancassurance model?
We started business in 2008 and for the past eight years, we have been operating a bancassurance model.

For us, bancassurance is not a distribution channel, it is a business model. Considering the distribution strength, we launched a pure bancassurance business model with each aspect of the business customized to the specific needs of the customers of distributing banks.

We have demonstrated the ability to harness the potential of private and public sector banks and have grown distribution over the years. The company has spent considerable time in understanding the customer, the operating ecosystem and the bank staff in each of the partner banks to optimize. This has resulted in a good understanding of the market on both the ‘buy-side’ and the ‘sell-side’, helping us to create the fastest growing life insurance company in India.

Kindly provide details of your product portfolio. Which diverse groups do these products cater to?
We have a good mix of products in both ULIP and the Traditional space, which cover needs such as wealth accumulation, planned guaranteed payouts and guaranteed monthly income. Currently, we do see a higher proportion of ULIPs in our portfolio as compared to traditional plans, perhaps due to the positive outcomes seen by our long-term loyal ULIP customers and positive market direction. Over a longer period, we do see a balanced mix of traditional and ULIPs based on our customer research on product preferences, especially for mass market customers where we believe the risk appetite is lower. So overall, our product pipeline looks very healthy.

The new set of products aim towards a sharper customer proposition to address key needs like retirement accumulation, children’s education and marriage for risk-averse customers, pure protection, and guaranteed savings to plan for life’s milestones. Also, at present we have our product suite which caters to all relevant customer segments; we are exploring the possibility of designing customized products for HNI’s and NRI’s.

What are the marketing strategies employed by your company to reach out to a larger audience?
Being a pure bancassurer, we only sell to the customers of our partner banks through their branch network. The Company’s brand ‘Canara HSBC Oriental Bank of Commerce Life Insurance’ has the names of three of our partner banks and that is our biggest USP. We seek to provide the convenience of having one’s banking and insurance needs fulfilled under one roof, from a brand that is well trusted. Our marketing strategies are focused on empowering the licensed branch staff to provide effective life insurance solutions to their customers by providing visibility in and around the bank branch, through simple and easy to use sales aids for the bank staff. We also run 1,000+ OOH screens out of selected Canara and OBC bank branches. The screens are put at prominent locations within the bank branch. It has helped us create an instant connect with customers.

Kindly provide the details of initiatives taken in educating the customers and increasing the transparency of sales.
Our policies are based on the fundamentals of “Treating customers fairly”. The Company is committed to delivering ‘Value for Money’ to the customers, which is also an integral part of the corporate strategy. This ensures that the customers will always be first in every initiative that we take. Be it at the sales stage or during the processing stage or the entire service cycle. A ‘detailed needs analysis’ and ‘financial health-check’ is done to ensure that the right product is pitched for the right customer need. Customers are provided with clear information and are kept appropriately informed during the entire product life cycle. We make sure customers have a smooth post-sales journey with respect to servicing needs like switching funds, submitting claims, etc. We have created various touch points which are equipped to handle and assist all servicing requests and queries efficiently. We are cognizant that an engaged customer is absolutely critical and hence we have a comprehensive engagement strategy which attempts to establish a constant connect with the customer throughout the policy cycle.

What are the specific strategies adopted to reach out to the rural population, the social sector and economically weaker sections of the society?
Financial inclusion is an important agenda of the Government of India, which aims to deliver financial services at an affordable cost to the vast sections of the disadvantaged and low income groups who have very little access to banking and other financial products. Since inception, the company has had a very strong focus on financial inclusion and has always exceeded its rural and social sector targets mandated by the regulator on a year-onyear basis.

The bancassurance business model has enabled us reach out to the financially vulnerable population, covering channel partner bank customers having no-frill accounts, members of self help groups, micro-credit groups, joint liability groups and tenant farmers’ groups. From our own research, we have seen our banks successfully activate over 90% of their branch networks with a majority of branches in non-metro locations. This demonstrates that the bancassurance model is working well and reaching all segments of the community across the vast length and breadth of the country.

In a continuous endeavor to achieve this goal, we have been providing insurance coverage through our micro insurance product, Sampoorna Kavach Plan at a very low and affordable premium of ` 100. The enrolment process is very simple, involving a single page application form consisting of basic member details and declaration of good health signed by the customer. We are also in the process of launching new traditional products in the coming months, which would strengthen the product offering for the customers of these markets.

The Indian government is increasingly focusing on adoption of digital technologies in the financial industry. According to you, what opportunities would the adoption of digital technologies offer to the insurance industry?

The digital channel is cost effective, addresses a specific segment which prefers to deal in a non-physical manner and has huge potential. The rapid maturing of mobility based technology is making it easier for customers to engage with insurers. The consumer’s decision making and buying pattern is evolving from the traditional Physical-Physical to a mix of Digital-Digital, Digital-Physical and Physical-Digital. The benefit which a consumer gets is immense - standardized sales process, increased transparency, multitude of options, customized solutions and most importantly comprehensive information to take an informed decision.

What are your company’s plans for expansion and growth over the next five years?

Our vision is “1% penetration of customer base of our distributor banks and 1 million customers by the year 2020.” We are a blue blood bancassurance company and over the past eight years have developed sufficient expertise in this space. We will continue to expand and grow this channel as we believe it has a lot of potential still waiting to be tapped. Our three partner banks have a network of over 9,000 branches and a cumulative customer base of 60 million. We haven’t yet scratched the surface as our current penetration levels are less than 1% of the customer base, and hence there is so much more that we can do. We have aggressive plans to reach out to these customers so that we could offer them our products. The next wave of our growth will also ride on the Digital platform. The e-commerce opportunity is waiting to be tapped and Life Insurance cannot be left behind. The channel is cost effective, addresses a specific segment which prefers to deal in a non physical manner and has huge potential. We have initiated measures to tap this market aggressively, and look forward for opportunities to emerge.

IDBI Capital Markets & Securities Limited

Kindly give us a brief of various segments in which IDBI Capital Markets operates.
Broadly, IDBI Capital provides services in three major areas – Investment Banking, Institutional & Retail Broking and Portfolio Management Services. In the Investment Banking space, we provide services in Capital Market transactions, M&A and Private Equity (PE), Syndication of Debt and Resolution of Stressed Assets.
On the Broking front IDBI Capital is empanelled with leading institutions as a preferred broker. We also service a vast network of retail and HNI customers and have alliances with leading banks to extend the reach of our broking services across India.

Brief us about company’s new product launches planned for the current year?
To improve our bouquet of services, we are about to launch Portfolio Management Services in Equity for our HNI Clients. The same is in the advanced stages of implementation. Simultaneously, we are also entering into the Currency Derivatives segment to cater to our retail clients. We are increasing the feature list of our existing trading products, and are also developing a digital platform for onboarding of clients to enable paperless account opening within hours of uploading of documents. There is potential in the stressed assets space, clubbed with mergers & acquisitions and backed by PE/buyout deals. We are also exploring the Alternative Investment Funds (AIF) space to increase our range of services. In order to extend quality services to our Investment Banking customers we are moving to the CRM platform.

The Indian government is increasingly focusing on adopting digital technologies in the financial industry. How, according to you, can broking industry transform their businesses using these technologies?
The Indian brokerage industry is already highly technology-oriented with the whole process from trading to settlement of trades being seamlessly electronic. With the exchanges now having allowed transfer/lien marking of stocks & funds on mobile phones, the digital trading mode is already gaining momentum. The digital trading platforms are likely to easily broaden and deepen over the next year or so. Although the market share of these platforms will improve only gradually, these are clearly the “way forward’ over the next two years. Multiple investment options and more product features will get enabled on these platforms over the next year or so, in turn increasing their market share. With increased focus on digitization and the effects of demonetization, the Tier-II and Tier-III cities should be the areas of focus in order to channelize the rich sources of savings from such cities into the securities market and mutual funds.

Kindly share IDBI Capital Markets’ current financial performance. What are your company’s plans for expansion and growth over the next five years?
The current year’s financial performance so far is in line with the assigned targets. There has been a quantum leap in the brokerage revenue, both in retail as well as institutional segments. During the year we have extended our presence in some of the Tier-I and Tier-II cities. Going forward, we will continue to leverage corporate relationships of our parent, as well as work with leading public sector banks to scale up M&A, PE & Capital Markets business and Resolution of Stressed Assets. We are also gearing up for our foray in the Middle East region by opening an office in Dubai, and are exploring collaboration with offshore investment banks and advisory firms.

In your opinion what additional measures should be undertaken by the regulator to support the growth of Indian broking industry?
At present the compliance costs are phenomenally high, leaving brokers with narrow margins. Support from the regulator and centralized KYC rather than multiple agencies (CKYC/KRA) can substantially bring down costs. Further, brokers are constrained to pass on such costs to the investors. Reduced costs will ultimately improve market participation. New initiatives like digitalization of KYC requirements (E-KYC) recently introduced by the Regulator, while laudable need to be looked at in a holistic perspective to provide the intended ease to investors. Issues like acceptance of POA in digital form should also be taken by SEBI with concerned departments.

Infrasoft Technologies Limited

Kindly brief us about the journey of Infrasoft Technologies.
We started in mid-nineties with the vision of creating innovative products for BFSI industry. We focus on developing market leading products – Core Banking, RegTech (Anti-Money Laundering, FATCA & Anti- Fraud), Microfinance, Islamic Banking, Loans Origination & Management, Payments, Mobility and have expanded to 36 countries with over 450 client Banks. Now we are in the age of Digital 2.0 and our innovation DNA remains the same. We are the quintessential startup and innovators.

The Indian government is increasingly focusing on adopting digital payment technologies in the financial industry. What will be its long term impact on Payments in India?
India will leapfrog into digital payments bypassing plastic. That’s a certainty and we are very excited to play a part in this. UPI has been a game changer and we have seen a huge jump in the transactions. We believe that the adoption rate will skyrocket through network effect as both consumers and merchants become more aware and adept. This will further encourage new business models and technologies such as voice payments, hyperlocal offers and loyalty management, shopping bots and payment bots to name a few. There will also be huge accumulation of consumer transaction data, where artificial intelligence driven data analytics will be used to drive competitive edge. The potential is immense.

What else do you see as the growing technology trends within BFSI Industry?
Our customers are partnering with us to take them through the journey from digital adoption to digital transformation and then to digital innovation. The digital innovation age will be driven by Big Data and Artificial Intelligence. Bots will become mainstream and the new-age Banking will offer a complete 360 degree experience of digitization that will include omnichannel, predictive analytics, personalization, IoT integration, augmented reality, digital twins, social media integration, and virtual reality. This is the roadmap on which we are working with our customers.

There are also a lot of discussions taking place on the use of Block chains in BFSI industry. Do you see an opportunity there?
Block Chain adoption is imminent but will need banks to work in a wider partnership. The regulatory framework also needs to evolve and I think both of these have already started to happen. IDRBT has recently published a white paper on applications of block chain technology in India, some Banks have launched pilot Business Use cases and SBI has taken the initiative to push for India’s first Block chain exploration consortium for Banks. Block chain is the future and I see a huge opportunity for technology innovators. It will disrupt a lot of legacy systems such as trade finance, asset management, clearing and settlement, global payments systems, KYC, compliance to name a few.

What is your take on the financial inclusion drive? How can technology accelerate this?
If the smallest banks in India also have the access to the same technology at affordable cost, then it will surely accelerate financial inclusion and that’s what we are driving with our CBS, micro ATM, mobility and payment solutions for small banks and PACS. We were also the first to offer cloud based CBS to drive technology adoption at smaller banks. InfrasoftTech has been the market leader in financial inclusion space and we are committed to bring benefits of digital technologies to the smallest banks in India.

InfrasoftTech profile
InfrasoftTech is a pioneer in Fintech Digital Solutions with over 450 clients across 36 countries including over 300 banks for their Core Banking & Payments Solutions of which 200 are on a Cloud model, and over 160 Banks using their RegTech solutions. InfrasoftTech has launched several digital solutions for the Fintech age banking including Mobility solutions, Bots, Contactless Payments, AI based Anti-Fraud solutions, and Big Data Analytics.

SBI General Insurance Company Limited

The Indian insurance industry is set on a growth trajectory as a result of growing financial literacy. What are your views on the opportunities in the Indian insurance industry?
In the coming years, the General Insurance (GI) industry will have a tremendous scope for growth. GI growth by various estimates is expected to be around 25%-30% in 2017. This growth is to be fueled by the Crop, Motor, Health, Personal Accident and Fire insurance segments. Also, the ‘Make in India’ initiative, Smart Cities initiative and several other reforms are likely to provide a boost to the manufacturing sector, which would translate to better business for property and marine cargo insurance.

Further, with consumers becoming far more technically savvy and aware, a shift in the consumer mindset is expected. They will prefer to have an ‘Informed Purchase’ of Insurance products rather than a ‘Consultative Purchase’.

The Indian government is increasingly focusing on adopting digital technologies in the financial industry. How, according to you, can the insurance industry transform their businesses using these technologies?
In its current state, the industry is already moving towards increasing digital touch points for customer acquisition and customer servicing. Many experimental projects are being conducted on this front.

The next frontier for insurance companies is to work towards datafication and using that to control the value chain more effectively. Sensors that test your health on a regular frequency, sensors that alert insurance companies about accidents and their location are some of the cutting edge technologies being tested across the world. They would fundamentally change how insurance is experienced and perceived. An example of this could also be trip delays which are covered under travel insurance. As flight/train delay data are now available digitally, would it make sense for insurance companies to expect that the customer files a claim for trip delay? Insurance companies can directly pay the claim to the customer even without the customer filing for a claim.

The growth of the Digital Space is acting as a catalyst for adoption of digital as a buying and servicing platform for insurers as well. Datafication (e.g. capturing driving behaviour or health outcomes) is still in a nascent stage, but over the medium to long term would likely play a strong role in influencing digital transactions. Social media offers a great servicing outlet for customers, as it is a convenient and user friendly medium.

The general insurance industry is slowly adopting these trends, and as consumers are increasingly adopting e-commerce, companies will create more advanced, digital and alternate channels for their consumers.

Brief us about your company’s new product launches planned for the current year.
We have recently launched Long Term Two-Wheeler Insurance through the SBI network and are keenly working on bringing this coverage to two-wheeler owners across the country. The policy offers comprehensive coverage for twowheelers, including damage to vehicle, third party liability and personal accident. We have also launched a comprehensive liability product - Broad Form Liability which has a wide range of inbuilt covers for comprehensive protection against the CGL and product liability risks. We have a few products both on the retail and commercial side planned for FY18. We are planning to improve and bring out a comprehensive health product for bank customers. We have received the regulator’s approval and in Q1FY18 would be launching the Home Contents Package cover for individuals intending to cover their home contents against all possible risks. On the commercial side, we intend to broad base our offering on the property insurance through various add on covers, apart from a few liability insurance covers.

Shriram Transport Finance Company Limited

Kindly brief us about Shriram Transport Finance Company’s journey since inception.
Our journey has seen us making several innovations while we stood at the very edge of organized finance. The banks and institutions were guided by the economists’ vision; the small truck owners (STOs) who always fell on their blind side was given the miss.

With a track record of about 38 years in this business, we are among the leading organized finance providers for the commercial vehicle industry, with a focus to provide various credit facilities to STOs. We have also added passenger commercial vehicles, multi-utility vehicles, three wheelers, tractors and construction equipment to our portfolio, making us a diversified, end-to-end provider of finance solutions to the domestic road logistics industry. Besides financing commercial vehicles (both new and pre-owned) we also extend finance for tyres, engine replacement and working capital.

Our pan-India presence through our widespread network of branches has helped in our overall growth over the years. As on Dec 31, 2016, we had 908 branches, 903 rural centres and tie-ups with over 560 private financiers across the country. As on Dec 31, 2016, our total employee strength was more than 16,000, including more than 10,000 product executives and collection executives who are colloquially referred to as our field force.

We have demonstrated consistent growth in our business and profitability. Our assets under management have grown by CAGR of ~16% from Rs. 40,218 crore in FY12 to Rs.72,761 crore in FY16. Our total income and profit after tax in FY16 stand at Rs. 10,245 crore and Rs. 1,178 crore, respectively.

Today we have approximately 20- 25% market share in pre-owned and approximately 7-8% market share in new truck financing, with more than 1.3 million customers.

Your company is considered to be a pioneer in the pre-owned commercial vehicle financing. Give us a brief insight of your major offerings. What new products and services is your company planning to offer in the near future?
We offer loans for the purchase of new/ used commercial vehicles, working capital loans like tyre financing, engine repair, personal loans, top-up loans, business loans, SME loans, etc.

We believe in partnering with customers throughout their journey from being a driver owner to a fleet owner. We keep in direct touch with our customers to understand their requirements on the go and to help them in their growth or to help tackle their business problems.

"Today we have approximately 20-25% market share in preowned and approximately 7-8% market share in new truck financing, with more than 1.3 million customers. ”

The Indian government is increasingly focusing on adopting digital technologies in the financial industry. What is your outlook on the adoption of digital technologies over the next 5 years?
Customers’ expectations are generally determined by other enterprises. Integration of web, mobile, social, and in-person customer service has increased the level of expectations among the customers today. Technology can make financial operations easier and convenient. Keeping this in mind, we have adopted the following steps towards digitalization. A customer can get his instalment payment done through payment gateways, wallets, UPI and with the swipe of his debit card. The same is enabled on web and mobile platforms. He can communicate to us about his interest for any loan or other products. We are able to witness a phenomenal shift in our non-cash collection over the last couple of months from what it used to be earlier. We understand that large financial entities including banks get more than 60% of digital traffic through mobile. The financial industry also feels that mobile will become the most popular consumer channel in the future, and hence our digital plans for the next five years are more concentrated on the mobile platform for a speedy customer service.

Customers will have provision to apply for their loan requirements online. We are confident of obtaining the required documents for financing a commercial vehicle by proper integration of our system with UIDAI and Vaahan servers through the Ministry of Transportation, which will enable us to offer credit in the shortest possible time. We have already made headway with UIDAI on e-KYC authentication. This will make the whole lending process digital to a great extent.

We are expecting a seamless digital registration of NACH mandates by the customers through an authenticated OTP process. We have already started working with NPCI through our lead banks on the same. This will lead to a drastic drop in the turnaround time in the registration process.

"While demonetization has posed some challenges for the short term, we see huge opportunities to fund and help the unorganized finance market and to bring them together"

All other service requests during the loan period are also planned through digital modes. Customers will be able to send requests online for loan closure and to receive the NOCs. The process of endorsing our financial interest on the vehicle and removal of the same digitally is also underway. It will take momentum on the readiness of government agencies and this process will wipe out the usage of physical RTA forms.
Apart from the loan process and maintenance, we are trying to build an ecosystem with other service providers in our app as below:-

  • Applying for Fast Tag and maintenance for facilitating toll payments
  • Load management services
  • Facility to purchase tyres, lubricants, etc., at discounted rates, tie-ups with authorized mechanic garages for vehicle repairs at competitive rates
  • Insurance needs for asset/s, business and life

What do you think are the biggest obstacles in India’s journey towards a less-cash economy?
Banks and financial institutions need to put huge infrastructure in place for transactions through cards, mobiles. A lot of education initiatives may need to be undertaken. Internet services, which currently stand at only 26% coverage in India, need to expand at a rapid rate. Though this is the biggest decision of this government, continuous perusal would be the key for success. This could be termed as cultural shift. The Government also needs to have a relook at its taxation structure and make it easier to comply with. Huge costs of audit and tax filing on high frequency make it difficult for small business owners to comply with 100%. Tax brackets should be brought down as more number of people and businesses are brought into the tax net.

What are STFC’s plans for expansion and growth over the next five years?
We see huge opportunities ahead. While demonetization has posed some challenges for the short term, we see huge opportunities to fund and help the unorganized finance market and to bring them together. We have also opened up large avenues by starting a business loan vertical, wherein we would like to encash the potential of gaining larger share of our customer wallet. Instead of only funding for vehicle requirements, we would like to go for full-fledged funding requirements of our existing customers to start with. We look forward to building up an AUM of more than 1.2 lakh crore by the year 2020.

Editor Preeta Misra
Sub-Editor Naina Acharya, Yogesh Jambhale
Editorial Team Omesh Kandalkar, Christopher Dsouza, Agnel Peter, Yash Kavi, Rohit Singh, Mihir Shah, Aakanksha Sawant, Rohit Pawar, Nishikant Sharma
Sales Team Suhail Aboli, Jaison Swamidas, Triveni Rabindraraj, Rajesh Kandari, Apoorwa Tyagi, Karan Abrol, Anchal Devnani, Manjula Dinakaran, Subhonita Gargari, Sunena Jain, Prasad Kachraj, Dharmesh Kapoor, Amit Kumar, Keerthi Madhu, Shivakar Mathur, Ayushi Nayak, Sushmita Nigam, Suchitra Pandey, Siddarth Ravindran, Smita Roy, Rashmi Singh, Sukhvinder Singh
Operations Team Mangesh Shinde, Nehal Khosla, Prem Kumar, Ankur Singh, Sumit Sakhrani, Rajesh Gupta, Melita Menezes, Smruti Gandhi, Tia Roy, Upasana Mohapatra, Lakshaya Sahni, Archana Singh, Parmeshwar More
Design Team Mohan Chilvery, Sonal Gangnaik, Tushar Awate, Yakoob Mohammed, Shilpa Chandolikar
IT Team Ashish Mane, Madhura Thakurdesai, Kunal Kerkar, Vaishnavi Wani

Indian Banking Overview

Indian Economic Progress

The Indian economy is on the retrieval path, supported by sound government policies and structural reforms. It has played a significant role in withstanding global uncertainties and dynamics of the rest of the world. During 2015, India continued to depict a much smaller Current Account Deficit (CAD) as it experienced large foreign direct investments flows. In fact, India’s CAD was at its lowest level in seven years in the quarter ended March 2016. The international reserves of India have increased by USD 46.7 bn since Mar 2014 to USD 350.4 bn in Dec 2015. Despite better growth prospects, India still faces the risk of high household inflation, fiscal deficits challenges along with risks of low investments flow, commodity cycle reversals, weakness in corporate sector financial positions and deterioration in the bank asset quality.

India’s gross domestic product (GDP) stood at 7.6% in FY16 up from 7.2% in the preceding year. The government has pegged the GDP growth rate at 7- 7.75 % for FY17. The up lift for FY17 is expected to come from strong domestic demand, improvement in industrial activity, and an upturn in private investments, infrastructure development and overhaul of the corporate sector and revival of public sector bank balance sheets.

Over the past seven years since the 2008-2009 global financial crisis, the Indian banking sector has depicted a distinct performance. As per RBI, the Indian banking industry is sufficiently capitalized and well-regulated. The banking industry consists of public, private, foreign, regional rural and co-operative banks . Nearly 80% of the market share is dominated by public sector banks. Over the years, Indian private sector banks and foreign sector banks have exhibited improvements in their profitability, asset quality, lower credit costs and healthy capital reserves. On the other hand, public sector banks (PSBs) are facing decline in their earnings growth, reduction in profit margins, asset quality deterioration and increase in credit costs.

Credit & Deposit Growth Continued to Remain Sluggish
The credit and deposit growth of all SCBs have significantly declined during FY16. This is largely contributed by the overall subdued performance of the public sector banks. Credit growth of all SCBs slowed down to 8.8% in FY16 from 9.7% in FY15. Similarly, the deposit growth rate of all SCBs decelerated to 8.1% in FY16 as compared to 10.7% in FY15. Private and foreign sector banks outpaced public banks as the credit growth amongst the private and foreign sector stood at 24.6% and 11.8% respectively, whereas that of public sector banks displayed a marginal growth of 4% as of March 2016. Deposit growth amongst private and foreign sector banks were marked at 17.3% and 13.3%, public sector banks showed a growth of merely 5.2% for FY16.

Capital to Risk Weighted Asset Ratio for all SCBs improve in FY16
The credit and deposit growth of all SCBs have significantly declined during FY16. This is largely contributed by the overall subdued performance of the public sector banks. Credit growth of all SCBs slowed down to 8.8% in FY16 from 9.7% in FY15. Similarly, the deposit growth rate of all SCBs decelerated to 8.1% in FY16 as compared to 10.7% in FY15. Private and foreign sector banks outpaced public banks as the credit growth amongst the private and foreign sector stood at 24.6% and 11.8% respectively, whereas that of public sector banks displayed a marginal growth of 4% as of March 2016. Deposit growth amongst private and foreign sector banks were marked at 17.3% and 13.3%, public sector banks showed a growth of merely 5.2% for FY16.

Asset quality of all SCBs Continued to Deteriorate in FY16
The gross non-performing advances (GNPAs) of public sector banks continued to display the highest level of stressed advances ratio at 14.5 %, compared to private and foreign sector banks that recorded stressed advances ratio at 4.5 %. The GNPAs of all SCBs sharply increased to 7.6% as of March 2016 compared to 4.6% in FY15. The restructured standard advances ratio declined considerably to 3.9% as compared to 6.4% in FY15 for all SCBs. GNPAs largely contributed to the increase in the overall stressed advance ratio to 11.5% for FY16 from 10.9 in FY15. Looking at the y-o-y growth of GNPAs there has been a significant rise across public, private and foreign sector banks in FY16. This is reflected in the sharp 79.7% increase in GNPAs of SCBs during FY16.

Amongst the major sectors, the industrial sector showed a steep rise in the GNPA ratio at 11.9%, followed by agriculture, services and retail sectors with GNPA ratio as 6.0%, 5.8% and 1.8% respectively during FY16.

Due to enforcement of balance sheet cleaning activities like risk provisions and write-offs, return on assets (RoA) declined sharply to 0.4% in FY16 from 0.8% in FY15. On similar lines, return on equity reduced to 4.8% in FY16 from 9.3% in FY15.

Factors Shaping the Indian Banking Industry
Untapped Opportunity – size of Indian market for financial services
With a population base of ~ 1.3 billion, with ~50% being in the 15-25 age bracket, India is a huge and growing market for financial services. (Source: Census India). Financial Inclusion is the key catalyst for the next phase of growth in the banking sector. It aims at a widespread of financial services to those people and enterprises that still do not have any access to financial sector services. The objective is to promote financial literacy and consumer protection amongst the masses so that they can take correct financial decisions as this will also help in overall economic progress of the country. India possesses immense opportunity for the growth of financial inclusion as the percentage of banking population accounts for only 53.1% as compared to 93.6% in the United States and 98.8% in Germany for 2015. The proportion of adult population with individual bank accounts has gone up from 35% in 2011 to 53% in 2015.

Growth in number of ATMs and offices across different regions in India
Banks are increasingly adding more number of ATMs and branches in the rural, semi-urban areas with the aim for inclusive growth. The total number of ATMs in India has grown from 181,252 in FY15 to 198,952 in FY16 reflecting an approximately 10% growth. As of Mar 2016, ATMs of all SCBs in rural and semi urban areas accounted for 44% of the total ATMS in the country. Looking at the CAGR of the ATMs from 2011-2016, rural areas have witnessed maximum growth of 37% followed by semi-urban areas with 24%, the overall CAGR of all SCBs in India stood at 22%.

The total number of bank offices in India has grown to 132,574 in FY16 compared to 125,863 in FY15. The overall bank branches grew by 5.3% in FY16, with rural areas accounting for the largest share at 38%.

Role of Regulators and the Government - Emergence of Differentiated Banking
The Government and regulators play a pivotal role in providing an enabling environment for sustainable growth of the financial sector. The Indian Government’s policy around the financial sector is the focus on financial inclusion. The government has undertaken various initiatives to push financial inclusion, this includes setting up of 25% bank branches in unbanked areas, driving ‘Banking for all’ by 2018 initiative under Pradhan Mantri Jan Dhan Yojana (PMJDY) and granting loans to small business under Micro Units Development & Refinance Agency Ltd (MUDRA) scheme amongst others. Two years back, the government had launched Pradhan Mantri Jan Dhan Yojna (PMJDY), the biggest financial inclusion initiative in the world.

In order to expedite the penetration of financial services in the unbanked regions of India, RBI has created a framework for licensing payment banks/small banks and differentiated banks. These local area banks, payment banks and small banks are expected to meet credit and remittance requirement of the small businesses, unorganized sector, low income households, farmers and migrant workforce. During FY16, in all, 23 new banking licenses were granted which included two universal banks, 11 payment banks and 10 small finance banks. The two universal banks have started their operation during 2015; amongst the small finance banks, Capital Local Area Bank has commenced its operations in April 2016 and others are likely to start their business by Sep 2016.

Role of Technology – Digital Banking
The last few years have witnessed a transition of banking from a predominantly traditional business to more of a customer focused one. An efficient payment system can be envisaged as the lubricant which speeds up liquidity flow in the economy, thereby creating necessary impetus for economic growth. Customer involvement through the most relevant channels has become of key importance for maximizing customer value and creating newer and more innovative revenue streams for banks. Although some concerns regarding the health of the Indian banking sector prevail, there is a widespread of optimism in the Indian economy. Taking advantage of digital technology and leveraging its potential to transform the banking sector is catching the attention of banking sector leaders. There are enormous opportunities present in the form of internet banking, mobile banking, mobile wallets, cloud computing, information security, and virtualization amongst others, in order to make financial infrastructure smarter, safer and faster. With the new government’s vision for digital India, regulatory moves have positioned Indian banking for digital transformation.

Advent of FinTech Ecosystem
The Indian banking industry has embarked upon its digital journey and is catching up quickly with its global peers in terms of technology adoption. In recent years, the phrase ‘FinTech’ has gained a lot of buzz in the Indian financial services sector, media, start-ups and entrepreneurial circles. FinTech are technology based companies that enable and/or collaborate with financial institutions to create highly integrated ecosystems that infuse expertise, rich experience, advanced technology to make existing financial systems more efficient and effective. The advent of the FinTech ecosystem in the Indian banking sector has begun to transform the lives of millions; therefore integrating FinTech in the Indian banking architecture has become a top priority for the banks.


India’s diversified financial sector is undergoing expansion, both in terms of growth of the existing financial institutions and new entities entering the market. The sector comprises of commercial banks, insurance companies, non-banking financial companies, mutual funds, pensions funds and other smaller financial entities. India’s financial sector has been dominated both by the banking and the insurance companies.

India’s insurance sector has evolved from its fundamental role of providing basic protection against risks to becoming a key pillar to support India’s rise to economic prosperity and growth, providing funds for nation building projects and driving social security.

According to the report ‘World Insurance in 2015’ created by Swiss Re, the reinsurance major, the global GDP grew by 2.5% in 2015 which in turn moderated the growth of global re/insurance industry in 2015. As per the report, the real global direct life and non-life insurance premiums written grew by 3.8% in 2015, up from 3.5% in 2014. However in nominal US dollar terms, due to wide spread currency depreciation against USD, premiums were down by 4.2% compared to the last year.

In 2015, the global life premium stood at US $2,533.8 bn compared to US $2,665 bn in the previous year, recording a growth of 4% in 2015 as compared to the growth of 4.3% in 2014. The global non-life premium stood at US $2,019 bn in 2015 as compared to US 2,123.7 bn in 2014, recording a record of 3.6% in 2015 compared to 2.4% in the earlier year.

A comparison of the premium growth in advanced and emerging economies point out that, emerging economies witnesses a healthy growth in premium compared to that in advanced economies. In the life insurance segment, premium growth in the advanced economies slowed down to 2.5% compared to 3.8% in the previous year, while that in the emerging economies grew by 12% compared the previous year. Under the non-life insurance segment, premiums in the advanced economies grew by 2.6% in 2015 compared to 1.1% in the previous year, while the premiums in the emerging economies grew by 7.8% as compared to 8.6% in 2014.

Despite the lower contribution to the global insurance market, India continues to occupy the bright spot
India’s share in global insurance premiums stood at 1.6% in 2015, as compared to 1.5% in 2014. Of the total insurance business, India’s life insurance premiums accounted for 2.24% share of the total global life insurance premiums in 2015 as compared to 2.08% in 2014. While in terms of non-life insurance, India’s share in the global non-life insurance premium stood at a mere 0.7% in 2015.

In India, the share of life insurance premiums of the total premiums stood at 79% while that of non-life insurance premiums stood at 21%. Of the total 88 countries in the global insurance market, India was ranked 10th and 18th in the life and nonlife insurance business respectively in 2015. In 2015, the India’s life insurance premiums increased by 7.8% as compared to global growth of 4%, while the non-life premiums grew by 8.1% as compared to the global growth of 3.6%.

While India’s share in global insurance premiums continue to be low, it also ranks low in terms of insurance penetration and density, the two important parameters that show the development of insurance sector in any country. Insurance penetration refers to premium as a percentage of GDP whereas insurance density refers to per capita premium or premium per person. In 2015, India’s insurance density stood at US $55, way beyond the world average of US $621.

The level of insurance penetration depends on a large number of factors like level of economic development of the country, the extent of the savings in financial instruments and the size and reach of the insurance sector. In 2015, the insurance penetration in India stood at 3.4% as against the world average of 6.2%. Against the world average of 3.5%, the life insurance penetration in India stood at 2.7%. On the contrary, during the same period, non-life insurance penetration in India stood at 0.7% as against the world average of 2.8%. Some of the major factors responsible for lower penetration of insurance products in India are low income levels, low consumer preference, untapped rural markets, claim-settlement time and constrained distribution channels.

In terms of total premiums, public sector insurers continue to dominate the Indian insurance industry
As of at the end March 2016, there were 54 insurers operating in India. Of these, there are 24 life insurers, 24 are general insurers, 5 are health insurers, and 1 is reinsurer. Of the 24 life insurers, 23 companies are in the private sector, while one is the public sector company. Of the 24 non-life insurers, 18 companies are in the private sector while 6 companies are in the public sector.

The total premiums of all the registered insurers stood at Rs. 463,323.2 bn in 2015, registering a growth of 12.2% over the previous year. Public sector insurance companies continued to dominate the Indian insurance space. In terms of total premium income of the insurance companies, the total premiums of the public sector companies stood at Rs. 318,977.2 Cr in 2015, growing at a pace of 11.4% as compared to the previous year. On the contrary, the total premiums of private sector insurers stood at Rs. 144,346 Cr in 2016, registering a growth of 14.1%.

Indian Life Insurance Industry

Despite the decline in its share, LIC dominates the Indian life insurance industry In FY16, the total premium income of the Indian life insurance industry stood at Rs. 3,669.4 bn, registering a growth of 11.8% over the previous year. Premium income of the private sector life insurers slowed down during FY16. The total premium income of the private sector insurers stood at Rs. 1,005.0 bn in FY16, registering a growth of 13.6% as compared to the growth of 14.3% recorded during FY15. The total premium income of the sole public sector life insurer, LIC, stood at Rs. 2,664.4 bn in FY16 registering a growth of Rs. 11.2% as compared to the previous year.

Of the total premium income received by the life insurers in FY16, renewal premium accounted for 62.2% as compared to 65.5% in FY15. First year premiums contributed remaining 37.8% to the total premiums received in FY16, as compared to 34.5% in FY15. During FY16, the income through renewal premiums grew by 6.2% as compared to 10.7% growth in the previous year. During the same period, the income from first year premiums grew by 22.5% as compared to the decline of 5.8% in FY15.

The bifurcation of first year premium income of life insurers indicate that the single premium income grew by 32.5% in FY16 as compared to the decline of 2.4% in FY14. In case of LIC, single premium products continue to play an important role as they contributed 27.8% to the total premium income of LIC in FY16. In comparison to LIC, the share of single premium income in the total premium income of private sector insurance companies stood at 13.7% in FY16.

The unit-linked products (ULIPs) registered a growth of 12.6% in FY16, growing from Rs. 416.2 bn in FY15 to Rs. 468.7 bn in FY16. On the other hand, the premium income from traditional life insurance products grew by 11.7% in FY16, growing from Rs. 2,864.8 bn in FY15 to Rs. 3200.7 bn in FY16. As a result, the share of ULIP products in total premium increased to 12.8% in FY16 as compared to 12.7% in FY15.

The market share of LIC, on the basis of the total premium income, decreased from 73% in FY15 to 72.6% in FY16. On the other hand, the market share of private life insurers increased from 26.9% in FY15 to 27.4% in FY16. The comparison of the first year premiums of the life insurance companies in FY16 indicate that LIC continued to dominate the space with a share of 70.5%, while the share of private sector insurance companies stood at 29.5%. Similarly, in the income from renewal premium too LIC dominated the space with a share of 73.9% as compared to 26.1% share of the private insurers in FY16.

During FY16, the life insurers issued 267.4 lakhs new policies as compared to 259.1 lakh policies in FY15. As a result, the total number of new policies issued grew by 3.2% in FY16 as compared to a decline of 36.6% in FY15. Of the total new life insurance policies issued, LIC alone issued 205.5 lakh new policies, accounting for 76.8% of the new policies, while the private insurers issued 61.9 lakh new policies accounting for 23.2% of all the new policies issued during FY16.

Life Insurance Industry claim settlement ratio for individual policy holders improves slightly in FY16 as compared to FY15
In FY16, the life insurance industry paid benefits of Rs. 2,011.7 bn constituting almost 55% of the gross premium underwritten during the period. During FY15, the life insurance industry had paid benefits of Rs. 2,109.2 bn, thereby constituting 64.3% of the gross premium underwritten during the period. The benefits paid by the private insurers in FY16 stood at Rs. 605.7 bn, constituting 60.3% of the premiums underwritten. LIC, on the other hand, paid benefits of Rs. 1,412.0 bn in FY16 constituting almost 53% of the premium underwritten.

With respect to claims settled, in FY16, the life insurance companies settled 8.54 lakh claims on individual policies amounting to Rs. 126.4 bn. Further in FY16, the life insurance companies rejected 15,157 claims on individual policies amounting to Rs. 7.4 bn. The claim settlement ratio of LIC was better than that of the private insurers. During FY16, the claim settlement ratio of LIC increased to 98.3% as against 98.2% recorded during the previous year. The percentage of claim rejection by LIC also came down to 0.98% in FY16 as compared to 1.15% in FY15.

For the private sector insurance companies, the settlement ratio increased by 2.1%, growing from 89.4% in FY15 to 91.5% in FY16. The percentage of claim rejection by the private life insurers also came down to 6.7% in FY16 as against 7.8% in FY15.

The overall life insurance industry’s settlement ratio increased slightly from 96.97% in FY15 to 97.43% in FY16, while the claim rejection ratio decreased from 2.08% in FY15 to 1.73% in FY16.

The number of offices of life insurance companies increased to 11,071 in FY16 as compared to 11,033 in FY15. The majority of offices of the life insurance companies are located in semi-urban towns which have a population between 10,000 and 99,000. Around 49% of the offices of the life insurance companies are located in these semi-urban towns. The urban towns with population between 100,000 and 999,999 accounted for second highest number of offices of the life insurance companies.

In total, both LIC and private insurers together covered 95.3% of all districts of India. The number of districts in India with no presence of life insurance offices stood at 30.

Indian General Insurance Industry
In FY16, the total direct premium underwritten by the non-life insurers in India stood at Rs. 963.8 bn as against Rs. 846.9 bn in FY15, registering a growth of 13.8% as against 9.2% recorded in the previous year. The public sector general insurers underwrote a premium of Rs. 476.6 bn in FY16 as compared to Rs. 425.5 bn in FY15, growing at a pace of 12.1% in FY16 as compared 10.2% in FY15. On the other hand, the total premium underwritten by private general insurers (including standalone health insurers) stood at Rs. 438.5 bn in FY16 as compared to Rs. 380.3 bn in FY15, growing by 13.1% during FY16 as against 9.6% in the previous year.

Motor insurance continues to dominate India’s general insurance business
The motor insurance business continued to be largest segment of India’s non-life insurance business, accounting for 43.9% share in the total non-life insurance business in FY16. In FY15, this share stood at 44.1%. The total premium of the motor insurance business grew by 13.2% in FY16 as compared to the growth of 10.5% in FY15.

The health insurance business occupied the second most dominant segment in FY16 with a share of 28.5% in the total non-life insurance market (26.7% in FY15). The total premium collected by health insurance segment stood at ` 274.6 bn in FY16 as compared to Rs. 226.4 bn in FY15, registering a growth of 21.3% over the previous year. The premium collection from the fire segment grew by 8.4% while that from the marine segment declined by 1.2% in FY16.

Non-life insurers witnessed a decline in new policies issued in FY16 as compared to FY15
In FY16, the non-life insurers (excluding standalone health private and specialized insurers) underwrote 122.1 mn policies as compared to 118.3 mn policies in FY15, thereby growing at 3.2% in FY16 as compared to 15.4% in FY15.

The public sector insurers witnessed a marginal decrease in the number of policies issued in FY16. The number of policies issued by the public sector insurers declined from 67.8 mn in FY15 to 67.1 mn in FY16, declining by 0.96% as compared to the growth of 12.9% in FY15. On the other hand, the number of policies issued by the private sector insurers grew from 50.5 mn in FY15 to 54.9 mn in FY16, thereby registering a growth of 8.8% in FY16 as compared to 19% in FY15.

Mutual Funds

In 2015 mutual funds in India crossed the Rs. 10 trillion mark. The total assets managed by the Indian mutual fund industry grew from Rs. 13.43 trillion in November 2015 to Rs. 16.94 trillion in November 2016, registering a growth of 26.1%. SIP, the popular investment method adopted by Indian mutual fund investors crossed the 10 million mark in December 2016 standing at 12.3 million. For the period April to December 2016, the mutual fund industry has witnessed an addition of ~619,000 accounts per month in the SIP segment. The vibrant mutual fund industry in India comprises of 45 asset management companies with their average age of 13.5 years. Eight out of the sample asset management companies in India have been in operations for less than six years.

A Dun&Bradstreet study of 33 asset management companies in India observed that the total income grew from Rs. 68.3 billion in FY15 to Rs. 87.0 billion in FY16 registering a growth of 27.4% and net profit grew from Rs. 16.3 billion in FY15 to Rs. 21.8 billion in FY16 registering a growth of 33.2% with an average industry profit marging of 24.5%.

The AUM of Indian asset management companies increased from Rs. 8,252 billion in FY14 to Rs. 12,328 billion in FY16, registering a growth of CAGR 22.2%. Income funds with Rs. 5,655 billion in assets accounting for 45.9% of the total AUM in FY16 is the biggest fund in terms on size. The large size of the fund can be attributed to the dominance of institutional investors with large ticket size who primarily choose to park their excess funds for short terms whilst earning attractive returns.

Non gold ETFs registered the highest growth of CAGR 88.3% for the period FY14-FY16. The ETF funds too were dominated by institutional investors. The simplicity of ETFs as it is based on popularly known underlying, passive investment strategy, liquidity, and lower management fees make ETFs an attractive investment option.

The average holding period of investments in equity assets was significantly longer compared to the investments in nonequity assets by asset management companies in India. Majority of the equity investments, accounting for 39.5%, were held above two years, while majority of non-equity investments, accounting for 51.3%, were held for less than six months.

The dominant source of return in equity investments is capital gains. In the equity market achieving any significant capital gain requires holding the securities for longer periods. This can be attributed to why majority of the equity investments are held over two years.

In FY16 the Indian mutual fund industry had 50.6 million accounts
The number of accounts in India increased from 44.4 million in FY15 to 50.6 million in FY16, registering a growth of 13.9%. The majority, accounting to ~99%, of these accounts held by individuals comprising of retail and HNI accounts. Due to the sheer volume of investor accounts, individuals are dominant in all categories of funds such as equity, debt, liquid/money market, ETFs, and FoFs ranging from 94.4% to 99.2% of all accounts held in these funds. However, stark differences can be observed when the AUM of these funds are compared. As of November 2016, 55.4% of the mutual fund assets in India are held by institutions and 44.6% are held by individuals. In addition for the period November 2015 to November 2016 institutions registered a growth in assets of 28.9% and individuals registered a growth in assets of 23.0%.

In terms of AUMs in different categories, institutional investors dominated debt oriented, liquid/money market, ETFs, and FoFs. The preference of debt and liquid/money market mutual funds by institutional investors can be attributed to their need to invest funds for a short term. Debt and liquid/money market instruments are less volatile compared to equity instruments. This helps institutions preserve capital erosion especially given their short time horizons for investments and the liquid nature of these schemes enables the institutional investors pull out funds instantly and at ease. In addition, institutional investors are more knowledgeable and well versed with the debt market which comprise of large volumes of bonds and money market instruments.

Individual investors only dominated the equity oriented schemes where they held 84% of the AUM. The dominance of individual investors in the equity funds can be attributed to the higher risk profile of these investors compared to institutional investors aimed at generating substantial returns over longer time horizon. The debt investment preferences of individual investors are primarily limited to the convenience of bank FDs and RDs. Also, the ability to generate substantial returns in the debt market requires a strong understanding of debt market and a large corpus, both of which are not in the wheelhouse of individual investors. The tax structure too plays a vital role in shaping individual investors focus away from debt funds. The long term capital gains on equity mutual funds are tax exempt while they are taxed at 20% (with indexation) on non-equity mutual funds.

Retail investors in India are heavily dependant on the distribution channel companred to investing directly. As of November 2016, 92% of the retail investors invested through distribution channels. A study by AMFI brought to light that the inflow of funds received by asset management companies in India were heavily skewed towards the top 15 cities in India. The lack of adequate distributors selling mutual funds in semi-urban and rural regions, infrastructure constraints, subdued awareness, and lower average ticket size were identified as the major cause of the skew.

In 2012, in an attempt to include the B15 region, SEBI allowed fund houses to charge an additional 30 basis points in the total expense ratio if new inflows from B15 cities were at least 30% of gross new inflows in the scheme or 15% of the average assets under management, whichever is higher. This development incentivised asset management companies to focus on B15 regions as fullfilling this criteria enables asset management companies to increase their revenues by charging higher fees. Therefore, many of the asset management companies incentized their agents to garner revenues from B15 regions. These continued efforts have resulted in AUM contribution of B15 witness a growth of 32.4% for the period November 2015 – November 2016. This growth was significantly higher than the growth registered by AUM contribution by T15 cities and AUM overall of 25.0% and 26.1% respectively for the same period.

Low level of financial literacy continues to hinder the growth of mutual fund industry
The penetration of mutual funds, especially in semi-urban and rural places is significantly hindered by the lack of understanding of mutual funds and their operations. In order to address this concern, asset management companies have been conducting investor awareness programs. In FY16, 38 AMCs had conducted 10,816 programs in 254 cities. In addition, efforts to educate retail investors and channelinse their savings towards mutual funds have also been undertaken by AMFI and SEBI.

Introduction of investor friendly registeration process and increasing bank branches provide growth opportunities

Exploring new frontiers
In 2016, SEBI issued guidelines to change the existing norms for investing in mutual funds. The traditional KYC process was lengthy and cumbersome. The revised guidelines allows for Aadhaar-based process for fulfilling KYC requirements to start investing in mutual funds. This new development is an investor friendly process which is expected to bring in new mutual fund investors.

Leveraging the baking channel
Leveraging the baking channel As of FY16, SCBs in India had 86425 branches in rural and semi urban areas. Furthermore, RBI has mandated banks with opening newer branches in these underserved regions of country to achieve financial inclusion ojectives and strenghtern its banking system. The lack of infrastruce in rural and semi urban areas acts as a major hinderance for asset managemnt companies in penetrating this market and creation of the required infrastructure would capital intenisve for them. Therefore, it would be wise for asset management companies to utilise the banking infrastructure in non-urban regions to educate and sell mutual funds.

Non-Banking Financial Companies

The Non-Banking Financial companies (NBFCs) sector forms an integral part of the Indian financial system. The sector plays a vital role in India’s economic growth and development. It aids in boosting ‘Financial Inclusion’ initiative by lending services to the unbanked population in rural/ semi-rural or few urban areas, also provide services to the Micro, Small and Medium Enterprises (MSMEs) segment. They provide product and services such as personal loans, housing loan, gold loan, insurance and loan for purchasing commercial vehicles, machinery, and farm equipment amongst others. NBFCs ability to understand their customer profile, their credit portfolio and deliver on customised products and services makes them as one of the fastest growing sectors providing innovation in financial products.

Although, few of the products and services provided by NBFCs are similar to those of banks, NBFCs are still at a disadvantage in comparison. As they work under certain regulatory constraints which restrict their business portfolio. In the time, when now all banks are forced to clean up their balance sheets especially in terms of lending activities, the role of NBFCs becomes more important as the push towards entrepreneurship is increasing creating further job opportunities.

Thus, there is a need for uniform regulations, practices and level playing field for NBFCs in India. In order to capitalise on their full potential with greater efficiency there is need to address the framework of this sector in order to meet ever growing financing need of the economy.

NBFCs are rapidly gaining importance as financial intermediary in the retail finance. Their contribution to the economy has significantly improved standing at 13% as on FY15. The growth is driven not only by the traditional NBFC products like commercial vehicle financing but also in the areas of loans financing like personal and housing etc. The success of the sector is attributed to the cost efficiency, bad debt control, customised products and better customer services. Along with on-going stress in the public sector banks due to mounting debts, the lending potential of the banks are going to deteriorate further, thereby providing opportunity for NBFCs to increase their reach.

The number of NBFCs registered with the RBI continues to decline -
The total number of NBFCs registered with RBI is witnessing marginal decline ~3% over the years. As of March 31, 2016, there were 11,682 NBFCs whereas in Mar 2015 the count was 11,842 as compared to that in Mar 2014 number of NBFCs was 12,029. The decline in the numbers is the result of consolidation in the sector and largely because of cancellation of Certificates of Registration (CoR). As on Jan 01, 2017 there were 2,903 list of NBFCs cancelled with RBI. Of the 11,682 NBFCs, 202 are deposit accepting in nature (NBFC-D) and 11,480 are non-deposit accepting NBFCs (NBFCs –ND). There are 220 systematically important non deposit accepting NBFCs (NBFCs-ND-SI).

Ownership pattern of NBFCs (No. of Companies)
NBFCs are broadly classified under categories based on their liability structure – deposit taking (NBFC-D), Non-deposit taking (NBFC-ND) and systematically important non-deposit taking (NBFC-ND-SI) which are subjected to stringent norms and provisioning requirements. Following is the ownership pattern of NBFC-D and NBFC-ND-SI

Financial Performance of the NBFC sector
The financial performance of the NBFC sector has remained largely unchanged for past two years. The aggregate balance sheet of the sector is expanded by 15.5 % in FY16 on a y-o-y basis as compared to that of 15.7 % in March 2015. NBFCs as a sector managed to maintain its borrowings levels, as the total borrowings increased by 15.3% in FY16 as compared to that of 16.9% in FY15. Whereas, loans and advances increased by 16.6% in FY16 from growth of 17.1% in FY15. Net profit as a percentage to total income displayed similar performance at 18.3% for FY16 as well as FY15. Return on Assets (RoA) also showed similar performance of 2.2% for both FY15 and FY16. Return on Equity (RoE) increased marginally to 10.6% in FY16 from 10.3% in FY15.

Balance sheet performance of NBFCs-D
NBFCs-D regulations are tightened so as to allow only sound and well-functioning companies accept public deposits. The balance sheet expanded by 29.2 % in FY16. Loans & advances, which account for 90% of the asset side registered significant growth of 33.1% increased to 2,117 bn from 1,590 bn in FY15. Investment activities also rose by 24% from 69 bn to 85 bn in FY16. Banks are the major source of funds for NBFCs-D increased to 659 bn approx. 19.3% growth from 552 bn in FY15. Debentures being the second major source of funding, witnessed a hike of 38.6% during FY16 grew from 389 bn to 539 bn in FY16. Total income recorded a growth of 26.8% over FY15.

Balance sheet performance of NBFCs-ND-SI
The balance sheet of NBFCs-ND-SI grew by 10.6% in FY16. Loans & Advances grew by 12.5% from 9,516 bn to 10,709 bn over FY15. Total borrowings grew by 9.8% from 9,411 to 10,335 in FY16. During FY16, funds were mainly raised through debentures, borrowings from banks and commercial papers. Investments displayed marginal growth of 0.5% in FY16.

Asset quality & capital Adequacy
The NBFC sector registered a credit growth of 15.5% in FY16. The quality of assets of the sector continued to deteriorate since 2012. However, the NPAs of NBFCs are lower than that of the banks.

The CRAR of the NBFC sector for FY16 remained well above the regulatory guidelines having minimum requirement of 15% of their risk weighted assets. GNPAs of the NBFC sector for FY16 as a percentage of total advances stood at 4.5% from that of 5.1% in Sep’15. NNPAs as a percentage of total advances displayed similar performance for FY15 & FY16 and stood at 2.5%.

Exposure to NBFCs
The three most dominant sectors in the Indian financial system are Schedule Commercial Banks (SCBs) followed by Insurance companies and Asset Management Companies (AMCs – Mutual Funds). These three sectors constitute to more than 80% of the financial system. While SCBs were the largest gross receivers of the funds, NBFCs were the largest net receivers of the funds from rest of the financial system as of March 31, 2016.

NBFC – Account Aggregator
As all the financial assets of the individuals like bank deposits, mutual funds, fixed deposits and insurance policies etc., are held under purview of different financial regulators, entities get a distributed view of their financial assets. For this purpose, NBFC – Account Aggregator will provide consolidated information of all the accounts held by the customer in organised manner. The draft was issued by RBI in March 2016.

Regulatory requirements for the NBFC sector
The NBFC sector plays a significant role in our financial system as it mirrors few of the banking operations which are critical in bearing the financial stability of the country. According to the Department of Non-Banking Regulation (DNBR) 2015-16, the aim of the DNBR was harmonisation of the regulation across NBFCs and banks in order to stream line the processes. During the year, few of the steps undertaken include early recognition of financial stress; speedy moves for resolution and recovery for lenders; guidelines in formulation of Joint Lenders’ Forum (JLF) and corrective action plan (CAP); assessing risk weights assigned to exposures to central/ state government/s and claims guaranteed by state government; refinancing of project loans; strategic debt restructuring; risk weights to investments in the corporate bonds. The process for issuing CoR was also simplified and rationalised; documents to be submitted were reduced from 45 to eight. Further, NBFCs were divided into two groups Type I & II, the type I NBFC does not accept public funds and do not have customer interface.

New age digital customers and rapid technological innovations have changed the face of businesses are conducted today. To have competitive advantage NBFCs need to leverage on the new avenues of customer interaction. In order to deliver differentiated customer experience, NBFCs can leverage on partnerships with other companies. Use of technologies like big data analytics, can help create synergies between the product – customer requirement, analyse customer portfolio etc. Social media engagement, this helps to attract larger customer base, proactive end to end visibility to customer, faster leads generation etc.

Going forward, with the government’s initiatives like ‘Make in India’, ‘Start up India’, ‘Digital India’ amongst others is expected to boost development in India. NBFCs are likely to benefit from underlying trends and developments in the Indian market. As the traditional banks already under stress; NBFCs would be of vital importance and can fill the necessary credit demand gap. The NBFCs therefore need to be well integrated in the financial system to match the growing needs of the economy. Furthermore, the Indian consumer is increasingly adapting to the digital technology in day to day life. Thus, NBFCs need to rethink on their strategies to enhance their product portfolio, process and customer experience. Additionally, they need to leverage on digital data for better credit decisions and social media to serve customers better etc. We hope that the forthcoming changes will further strengthen the robustness of the NBFC sector.

Global Securities Market

The global macro-economic factors play a vital role in determining the path of the securities market across all the countries. In the current extremely interconnected world, the butterfly effect is visible every day. The performances of stock markets are heavily interlinked to the performances of the listed companies and business expectations which are in turn linked to the economy. Therefore, it is vital to take look at the outlook for the major economic regions to understand and predict the performance of stock markets.

The real GDP growth of the world in 2016 is estimated to be 2.3%, compared to 2.7% in 2014 and 2015 (World Bank). 2016 witnessed a series of high intensity events in different regions that had an adverse impact across the globe. Uncertainty over the health of leading European banks, low oil price, Brexit, political instability, slowdown in China, and slow pace of US recovery are some of the major events that had a negative impact on businesses. The dark shadows of the great recession in 2008 and 2009 are yet to be fully lifted and are expected to linger in 2017 as well. However, the growth in 2017 is expected to come from government programs and monetary policies aimed to increase the aggregate demand. Therefore, the performances of stock exchanges worldwide are expected to be mildly positive.

The outlook on major economic regions are provided below:

Outlook 2017

The new administration in US is expected to usher in new changes aimed to boost the economy at the earliest. The major expected fiscal stimulus measures, reduction in tax rate, restructuring tax rate, and increase in infrastructure spending. These measures are aimed to increase the income of its citizens and incentivize American companies to manufacture locally. This development would also aid in the much needed – creation of jobs. Therefore, the outlook on US is mildly favorable.

In June 2014, the ECB adopted negative interest rates, becoming world’s first major central bank to take such a measure. The introduction of negative interest rates is a monetary policy tool aimed increasing the aggregate demand by reducing the cost of borrowing. The continuation of this monetary policy has not yielded the desired growth expected in the region. This can be attributed to the lack of optimistic outlook held by businesses and weak consumer demand.

In March 2015, the Quantitative Easing (QE) program undertaken by the ECB to increase money supply. In December 2016, the ECB announced that it would be curtail its QE post March 2017 to 60 million euros from the current 80 million euros per month till December 2017. The QE program was unsuccessful in achieving its desired growth and inflation target objectives.

In addition to the unsuccessful results/less than desired results from the monetary policies undertaken by ECB, weak demand, high unemployment, and terrorism continue to plague the European region. Therefore, the region is expected to have a less favorable outlook.

UK’s decision to exit the European Union in June 2016 is expected to witness adverse effects in 2017. Declines in FDI and loss of tariff free access to the EU market are expected to weigh heavily on the UK economy. These developments are expected to trigger a further currency devaluation of the sterling which would raise the price of imports and hurt consumers in the form of higher prices. This would hurt the GDP of UK as 65% of its GDP basket is comprised of consumer spending. Therefore, UK is expected to register mild growth in 2017.

The process of excess credit creation and over leveraging has deeply hurt the Asian economies. In June 2016, China’s total debt was registered at 250% of GDP (Guardian) and for the same period the Indian government’s debt was registered at ~70% of GDP (Fitch Ratings). Japan, Singapore, South Korea, Malaysia, and Hong Kong are some of other Asian countries with high debt. This development has put immense pressure on these countries to service debt and it increases their country risk. Thus, reducing their attractiveness to foreign investors and attracting new capital. However, high consumer demand, increasing purchasing power, positive sentiments, and introduction of government schemes aimed to boost aggregate demand are major growth drivers form the region. Therefore, 2017 Asian outlook is moderately favorable.

US based NYSE continued to dominate its leadership in terms of market capitalization amongst stock exchanges

In terms of market capitalization, stock exchanges from the US continued to dominate the list followed by stock exchanges from Japan and China. NYSE and NASDAQ collectively accounted for 39.1% of the global market capitalization of stock exchanges. The dominance of the American exchanges can be attributed to the long existence of these exchange houses, large number of companies listed in them, increasing number of foreign companies getting listed in them, and strong global interest in securities in these exchanges.

The top 15 exchanges collectively account for ~87.5% of the global market capitalization. Indian exchanges BSE India Limited and National Stock Exchange of India Limited ranked 11 and 12 respectively.

India’s BSE India Limited houses the highest number of companies globally

In terms of the volume of listed companies, the top 10 exchanges house 29,571 companies commanding ~64.7% of the global volume in 2015. The highest number of listed companies were registered with BSE India Limited (5836), followed by BME Spanish Exchanges (3,651), and TMX Group (3,559). The other Indian exchange house National Stock Exchange of India Limited ranked 10th having 1,794 companies registered.

American exchanges NYSE and NASDAQ have 2,424 and 2,859 companies respectively. In comparison the BSE India Limited houses almost double the number the number of companies listed in these American exchanges individually. However, the market capitalization of BSE is 8.5% of NYSE and 20.8% of NASDAQ. The stark difference in market capitalization to number of companies of these exchanges brings to light the higher value of securities traded in the American stock exchanges.

The Americas region continues to dominate the global market capitalization

The Americas region continued to dominate the global market capitalization scenario. The dominance can be attributed to the presence of three of the world’s largest stock exchanges in the region, NYSE, NASDAQ, and TMX Group. Collectively these exchanges house 8,842 companies and have a combined market capitalization of USD 26.7 trillion in 2015.

The de growth registered in the Asia Pacific region and globally can be attributed to the slowdown in trading activity in the Asia Pacific region. In early 2016, the Chinese stock markets faced major hiccups as their circuit breakers kicked in the early hours halting trading for long periods. In addition, the devaluation of yuan and increase in government control has continued to hurt the market performance.

Domestic Securities Market

Current Scenario of Indian Securities Market
FY16 was not a very good year for the global economy. The economic slowdown in China, the European crisis, weak global trade and prospects of an interest rate hike by the Federal Reserve led to risk concerns and volatility, thereby weighing down on economic growth. Consequently, emerging economies were impacted by these global cues. Likewise, the Indian equity markets also remained largely subdued during the year, having been influenced by reactions to weak quarterly earnings, falling crude prices and mounting non-performing assets (NPAs) of banks.

In FY16, the primary securities market showed decent growth, as reflected in the healthy rise in resource mobilisation by the corporate sector. Resources raised via private placement of debt were at record levels during the year. Funds raised through preferential allotments doubled as compared y-o-y. IPOs that opened during the year also received an overwhelming response. On the other hand, the secondary markets - the equity and foreign exchange markets in particular - were most affected by global spill-overs and fluctuations in global financial asset prices and portfolio flows. The global commodity slump forced Foreign Institutional Investors (FIIs) to reduce exposure to emerging markets, resulting in the portfolio investments by FIIs reflecting net outflows for the first time since FY09. Nevertheless, India is still considered to be a bright spot among its emerging market peers, with the International Monetary Fund (IMF) and the World Bank having been appreciative of India’s growth story.

I. Primary Market Trends

Overall resource mobilisation by corporates rises by 20.8% in FY16
In FY16, the cumulative value of overall resource mobilisation by the Indian corporate sector (public & rights issues, QIP, preferential allotments and private placement of corporate debt all taken together) stood at ` 5,807.5 bn. This translates into a 20.8% growth as compared to a year ago.

Resource mobilisation through public and rights issues more than doubles in FY16
During the year, 108 companies accessed the primary market and raised Rs. 581.7 bn via 95 public and 13 rights issues. The funds raised thus were more than twice the ` 192 bn raised in FY15 by 88 companies through 70 public and 18 rights issues in FY15.

The cumulative resource mobilisation in equities (public and rights issues) in FY16 stood at Rs. 240.6 bn from 87 issues. This was more than twice the Rs. 97.9 bn raised in FY15 via 64 issues.

Of the total resource mobilisation comprising equity and debt, the share of public issues increased to 84.1% in FY16 from 64.8% in FY15. On the other hand, the share of rights issues contracted to 15.9% from 35.2% in FY15. The share of debt issues in the aforementioned component of resource mobilisation stood at 58.6%.

IPOs receive overwhelming response in FY16
FY16 witnessed 74 IPOs to raise Rs. 148.2 bn, as against merely 46 to raise Rs. 30.4 bn in FY15. Of these 74 IPOs, 50 were listed on the SME platform. The non-SME IPOs that opened during the year received a massive response. Of the 24 such IPOs that were issued during the year, seven were oversubscribed more than 20 times, three were oversubscribed 30-40 times, while one was oversubscribed a whopping 70-80 times.

In FY13, SEBI had permitted the setting up of separate dedicated platforms for the listing and trading of SME securities, in order to provide an impetus to the SME sector. Although the quantum of capital raised through the SME platforms is still minuscule, the number of issues has been steadily increasing.

Private placement accounts for 78.9% of overall resource mobilisation in FY16
In FY16, the private placement of corporate debt accounted for a whopping 78.9% of the overall resource mobilisation by Indian corporates (equity, bonds, QIP, preferential allotments and private placement of corporate debt taken together). The funds raised by private placement increased by 13.3% during the year to an all-time high of Rs. 4,580.7 bn. In terms of numbers, 2,975 issuances were made in FY16 as compared to 2,611 in the preceding year. Private placement of corporate bonds is a mode of resource mobilisation that has been increasingly used by corporate entities in recent years. These funds are raised mainly for expansion of business plans and to support working capital requirements.

Resource mobilisation through preferential allotment jumps 76.6%
In FY16, the number of preferential issues decreased to 333 from 419 a year ago. However, the quantum of resources mobilised through this mode jumped from Rs. 282.6 bn in FY15 to Rs. 499.2 bn, which translates to a sharp 76.6% rise.

Resource mobilisation through QIP halves in FY16
In FY16, the resource mobilisation through the qualified institutional placement (QIP) mode halved as compared to the preceding year. Corporates raised Rs. 145.9 bn via 24 issues in FY16, as against Rs. 291 bn raised via 51 issues in FY15.

Public sector accounts for 53.5% of resource mobilisation in FY16
As per data furnished by SEBI, there were 11 public sector issues and 97 private sector issues in the primary market in FY16, as against three public sector issues and 85 private sector issues in FY15. However, although the number of issues of the public sector is significantly smaller, its share in funds raised was as high as 53.5% during the year. This was significantly higher than its 12.7% share in FY15. During the year, the resources mobilised by the public sector increased multi-fold from Rs. 24.5 bn in FY15 to a much higher Rs. 311 bn in FY16.

Banks/FIs/finance sector’s share in resource mobilisation contracts
Industry-wise classification for FY16 showed that the banks/FIs/finance sector retained a lion’s share in the overall resource mobilisation for equities. The funds raised by the sector increased from Rs. 106.4 bn in FY15 to Rs. 189.9 bn in FY16, reflecting a handsome 78.4% growth. However, the sector’s share in overall resource mobilisation contracted from 55.4% in FY15 to 32.6% in FY16.

There were a few sectors which raised little to zero funds in FY15 that raised a substantial quantum of funds in FY16. The most noteworthy among these were the automobile sector which raised Rs. 79.1 bn (13.6% share), the health & pharmaceutical sector which raised Rs. 40.5 bn (7%) the aviation sector which raised Rs. 30.1 bn (5.2%) and the power sector which raised Rs. 21 bn (3.6%).

II. Secondary Market Trends

During FY16, the Indian equity markets remained subdued due to turmoil in the global equity markets. Among the factors that weighed down on the markets were the economic slowdown in China, the Brexit, crisis in the Eurozone, the slump in global commodity prices, weakening global trade and prospects of an interest rate hike by the Federal Reserve. As on March 31, 2016, the benchmark indices, namely S&P BSE Sensex (Sensex) and Nifty 50 (Nifty) reflected a decline of 9.4% and 8.9%, respectively, as compared to March 31, 2015. The Sensex closed at 25,342 points as on March 31, 2016 as compared to 27,957 points as on March 31, 2015. Likewise, the Nifty closed at 7,738 points on March 31, 2016 as compared to 8,491 points as on the corresponding date a year ago. This was the first time since FY12 that both benchmark indices had reflected a decline. Nevertheless, both indices showed a decent growth over a five year period. Between FY12 and FY16, the Sensex and the Nifty rose by a CAGR of 9.8% and 10.2% per annum, respectively.

The average market capitalisation at the BSE in FY16 stood at Rs. 94.8 bn, about 6.6% lower than in FY15. Likewise, the market capitalisation at the NSE decreased by 6.2% to Rs. 93.1 bn. Over a five year period, however, both indices reflected a growth of more than 11% per annum between FY12 and FY16, reflecting the rapid growth of the Indian equity markets over the years.

As per data furnished by SEBI, the market capitalisation-to-GDP ratio, which monitors the growth and development of the stock market in tandem with the economy, contracted with respect to the BSE from 96.2% in FY15 to 88.4% in FY16, and with respect to the NSE from 94.1% in FY15 to 86.6% in FY16. Nonetheless, these were much higher than the 70% levels recorded in FY12.

The price-to-earnings ratio (P/E ratio), which is an indicator of the valuation of the shares, remained stable till July 2015, but entered a downward spiral thereafter. This was in tandem with the global turmoil that took place. The Sensex and the Nifty both touched their lowest P/E ratio levels in February 2016, before bouncing back in the following month. As on March 31, 2016, the P/E ratio of the Sensex and the Nifty stood at 18.6 and 20.9 times, respectively, as compared to 19.5 and 22.7 times, respectively as on March 31, 2015.

III. Derivatives Market Segment

The popularity of the derivatives market has grown by leaps and bounds in India over the past few years. Apart from registering a multi-fold increase in volumes, the market has also grown in terms of number of contracts traded, the traded value, and the number of products traded. As a matter of fact, the turnover in the derivatives market has even gone on to surpass the cash segment.

Between FY12 and FY14, the total turnover (cash and derivatives) on the BSE reflected a multi-fold growth, from merely Rs. 14.8 trillion in FY12 to Rs. 212.2 trillion in FY15. In FY16, however, the total turnover declined to a 4-year low of Rs. 52.2 trillion. On the other hand, the NSE sustained its growth momentum, increasing from Rs. 341.6 trillion in FY12 to a huge Rs. 690.6 trillion in FY16, at a CAGR of 19.2%. This growth was exclusively due to the derivatives segment.

Trading turnover at NSE grows by 15.2% in FY16, BSE records steep decline
In FY16, the total trading turnover (cash and derivatives) on the NSE grew by 15.2% from Rs. 599.4 trillion in FY15 to Rs. 690.6 trillion in FY16. This growth was spurred by a 16.6% growth in the trading volumes of its derivatives segment during the year. In contrast, The BSE’s trading turnover plunged by 75.4% in FY16 to Rs. 52.2 trillion, The BSE’s derivatives segment, in particular, recorded a steep 78% fall in its trading turnover from Rs. 203.6 trillion in FY15 to a much lower Rs. 44.8 trillion in FY16. The fall can be attributed to investors’ preference towards the NSE with respect to trading of derivatives.

Index options account for a lion’s share among the derivative products traded in the Indian derivatives market. In FY16, they accounted for 98% of the total derivatives segment turnover on the BSE and 75.5% on the NSE. Besides index option, the other derivative products that are traded on the NSE are single stock futures (12.1%), index futures (7%) and single stock options (5.4%). In the index derivatives segment at NSE, derivatives are offered on various indices including the Nifty, Nifty Midcap 50, Nifty Bank, Nifty Infra, Nifty IT, Nifty PSE and also in foreign indices such as the Dow Jones, S&P 500 and UK FTSE 100.

IV. Net Investments

Sustained capital inflows are crucial for any economy in order to meet its financing needs. Certain policy initiatives were introduced in the Union Budget FY16 aimed at projecting India as an attractive investment destination. Under the Foreign Portfolio Investor (FPI) Regime, the erstwhile FIIs, sub accounts and QFIs were merged into a new investor class termed as Foreign Portfolio Investors (FPIs) with effect from June 2014.

FPI investments plunge in FY16
In FY16, the net investment of FPIs in the equity and debt markets taken together turned negative for the first time since FY09. During the year, India witnessed net outflow of FPI investments to the tune of Rs. 181.8 bn, as against net inflows of Rs. 2,774.6 bn in FY15. The outflow of FPIs was seen in both, the equity as well as debt segments, the first time such an event had occurred since 1992. Although the announcement of an increase in FPI limits in debt securities spurred some degree of buoyancy in the market in the first half of the year, the market continued to lose some of its gains after October 2015, owing to fresh concerns about global cues, as well as some domestic concerns.

V. Mutual Funds

The mutual fund industry is one the fastest growing and most competitive segments of the Indian securities market. It plays a vital role in channelizing household savings in the capital market. During FY16, the regulatory reforms undertaken by SEBI with respect to mutual funds include the introduction of mandatory stress testing of liquid fund and money market mutual fund (MMMF) schemes, modification of product labelling in mutual funds, relaxation of restrictions on managing/ advising of offshore pooled funds by domestic fund managers, tightening of exposure limits on investments by mutual funds, and enhancement of scheme-related disclosures.

Mutual funds invest Rs 661.4 bn in equity markets in FY16
Mutual funds play an important role in channelizing household savings in capital markets. In FY16, mutual funds recorded a net investment of Rs 661.4 bn in the equity markets. This was 62.4% higher than a year ago, when mutual funds made a net purchase of Rs 407.2 bn in the equity markets. This was the second year in a row where mutual funds had recorded a net purchase in the equity markets, after five years of net selling.

In contrast, however, mutual funds’ net purchases in debt declined from Rs 5,870.2 bn in FY15 to Rs 3,762.9 bn in FY16, reflecting a sharp 35.9% decline. With debt accounting for around 85-90% of the aggregate net investment of mutual funds in the stock exchanges, this resulted in a decline in the combined net investments as well. Accordingly, the quantum of combined net investment by mutual funds in both equity and debt taken together reflected a decline in FY16. In FY16, mutual funds executed net purchases/sales (equity + debt) to the tune of Rs 4,424.4 bn, as against Rs 6,277.4 bn executed a year ago. This translates into a 29.5% decline as compared to the preceding year.

Resource mobilisation by mutual funds continues rising trend
In FY16, the gross mobilisation of resources by all mutual funds stood at Rs 137.7 trillion, as against Rs 110.9 trillion in the preceding year. This translates into a 24.2% increase as compared y-o-y. Correspondingly, redemption increased by 24.1% to Rs 136.3 trillion in FY16 from Rs 109.8 trillion in FY15. Consequently, the net resources mobilised by mutual funds stood at 1,341.8 bn as compared to Rs 1,032.9 bn in FY15, reflecting an increase of 29.9%.

The Assets under Management (AUM) of mutual funds, across schemes, continued its upward trend in FY16. It increased by 13.9% to Rs 12.3 trillion in FY16, from Rs 10.8 trillion in FY15.