Jilian Consultants Co., Ltd.
Jilian Consultants Co., Ltd.

Financial Services In India: The Definitive Guide (2021)

Overseas Corporate Compliance

India is expected to be the fourth largest private wealth market globally by 2028. India today is one of the most vigorous economies in terms of financial services globally. With policies such as the relaxation of foreign investment rules has received a positive response from various sectors as many companies announce plans to increase their stakes in joint ventures with Indian companies. As trends point, there could be a series of joint venture deals between global economic giants and local players. India has a vast financial sector with rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. With sectors such as commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. However, financial sector in India is predominantly a banking sector with commercial banks accounting for more than 64% of the total assets held by the financial system.

The Indian government has introduced several economic reforms to relax, regulate and uplift this industry. The Government and Reserve Bank of India (RBI) have formulated several measures to facilitate easy access to finance for Micro, Small and Medium Enterprises, such as Credit Guarantee Fund Scheme for MSMEs, facilitating guidelines to banks on collateral requirements and setting up a Micro Units Development and Refinance Agency (MUDRA). With a combined kick by the Indian government and its private sector, India is undeniably one of the world’s most vibrant capital markets. In the year 2017, a portal called ‘Udyami Mitra’ was launched by Small Industries Development Bank of India (SIDBI), with an aim to improve credit availability to MSMEs in the country. India has secured quite a high rank in protecting shareholders’ rights as per the reforms implemented by Securities and Exchange Board of India (SEBI).

The Indian financial services industry has several sub- sectors, these include, but are not limited to banking sector, mutual and pension funds, tax/ audit consulting companies, stock-brokering sector, financial advisory services, venture capital, all ranging from local/ small domestic players to huge multinational companies. The financial consultancy services are provided to a vast and varied client base ranging from individuals to private businesses to public organizations.

Overseas Corporate Compliance Services

Here are some key types of Financial Services in India with great growth prospects:

Banking

The banking industry is the backbone of financial services in India. India has  many sectors public, private, foreign, regional rural and urban/rural cooperative banks. There are many financial services in India offered in this segment that includes, Individual Banking, Business Banking, Loans. The banking sector is regulated by the Reserve Bank of India (RBI), which monitors and maintains the segment’s liquidity, capitalization, and financial health.

Tax/ Audit Consultancy

The Tax and audit financial sector includes a huge portfolio of financial services within the tax and auditing sub segment. This services domain is based on individual and business clients that includes, (a) Tax – Individual (determining tax liability, filing tax-returns, tax-savings advisory, etc.) and (b) Tax – Business (determining tax liability, transfer pricing analysis and structuring, GST registrations, tax compliance advisory, etc.). The auditing segment offers consultancy solutions such as statutory audits, internal audits, service tax audits, tax audits, process/transaction audits, risk audits, stock audits, etc. All these services are vital to ensure smooth running of operations of business bodies to diminish risks.

Capital Restructuring

These financial services are offered primarily to business organizations that include restructuring of capital structure (debt and equity) to boost profitability or respond to crises such as bankruptcy, volatile markets, liquidity crunch or hostile takeovers. This type of financial service solution mainly includes structured transactions, lender negotiations, accelerated M&A.

Professional Advisory

The professional financial service sector has an eminent hold in Indian financial service sector. It offer business individuals a vast portfolio of services, including investment due diligence, real-estate consulting, M&A advisory, valuation risk consulting, taxation consulting. These service offerings are given from individual domestic consultants to large multi-national organizations.

Stock Market

The stock market includes investment services in the Indian stock markets (National Stock Exchange and Bombay Stock Exchange), across various equity-linked products. The returns for investors are based on capital appreciation in the value of the equity solution and dividends or the payouts made by companies to its investors.

Treasury/ Debt Instruments

The financial services provide here include investments in government and private organization bonds. The issuer of these bonds provides fixed payments or interest and principal repayment to the investors at maturity of the investment period. The types of instruments in this sector include capital-gain bonds, GoI savings bonds, tax-free bonds, listed bonds, non-convertible debentures etc.

Brokerage

This business entity functions as an agent for the purchase of stocks or other financial securities is known as a brokerage. Full-service brokerage firms read the market and provides consultancy to their clients on which securities to buy. Portfolio and pension fund managers are among their clients.

Venture capital

In this financial sub-segment the venture capital is the initial money given by an investor to the holder of a new financially rewarding business idea for a share in the returns of the start-up business. Venture capital firms make new investments from a long-term perspective. Venture capital funds are a big boon for the start-ups that do not have access to financial sponsors.

Portfolio Management

This financial service sector includes a customised range of consultancy solutions provided to the clients for their financial goals by portfolio managers who study the market and analyze investments across a wide range of assets such as debt, equity, insurance, real estate etc.

The financial service sector form the backbone of any country’s economic growth and development. The financial service providers collaborate with stakeholders in the financial services industry to support and lead the market by consulting them in policy making, developing new revenue growth models, enhancing customer service experience, managing and reducing risks and building inclusive strategies. It is crucial that any country have strong developing financial sectors to ensure stability and rapid innovation. In recent decades India has made a remarkable progress in the financial sector. Making a note of current market trends in India, financial services sector is clearly to substantially grow on the back of rising incomes with significant government attention and the increasing pace of digital adoption.