Upload
anjnakandari
View
215
Download
0
Embed Size (px)
Citation preview
8/12/2019 Wd 0000000
1/18
India is one of the top 10 economies globally, with vast potential for the banking sector to
grow. The last decade witnessed a tremendous upsurge in transactions through ATMs, and
Internet and mobile banking. In 01!, the country"s #s $1 trillion %&'( 1.)! trillion*
banking industry is set for a greater change. Two new banks have already received
licences from the government. +urthermore, the #eserve ank of India"s %#I* new norms
will provide incentives to banks to spot potential bad loans and take corrective steps that
will curb the practices of rogue borrowers.
The Indian government"s role in e-panding the banking industry has been significant.
Through the +inancial Inclusion lan %+/ 101)*, banking connectivity in the country
increased more than threefold to 11,)! villages in 01) from 23,24! at the beginning of
the plan.
anks are also looking at new ways to attract customers. In 'eptember, 01), I5I5I bank
leveraged the popularity of the social platform, and launched its +acebook banking
service, ockets. The service enables customers to transfer funds and pay bills from within
the website.
The revenue of Indian banks increased fourfold from &'( 11.$ billion to &'( !2.4 billion
during the period 001010. In the same period, the profit after ta- increased from &'(
1.! billion to &'( 1 billion.
In 011), Indian banks had 130 overseas branches %12) in 0111* while foreign
banks had )12 branches in India %)04 in 0111*.
5redit to housing sector grew at a compound annual growth rate %5A6#* of 11.1 per cent
during the period +/ 00$1). Total banking sector credit is e-pected to grow at a 5A6#
of 1$.1 per cent %in terms of I7#* to touch &'( .! trillion by 013.
anks and housing finance companies %8+5s* together en9oyed a 0 per cent growth in
home loans in +/ 01)1!. 8ome loans disbursed by banks and 8+5s collectively grewby #s 1.20 trillion %&'( 2.:4 billion* in +/ 01)1! to reach #s 4.20 trillion %&'(
1:4.:$ billion* at the end of the fiscal.
Indian banks operating abroad en9oyed a higher credit growth in comparison to foreign
banks operating in India, as per an #I survey on international trade in banking services
for 011). According to the survey, growth of credit e-tended by Indian banks"
branches operating overseas grew by )1.3 per cent to #s :$:,:30 crore %&'( 43.)2
billion*; credit e-tended by foreign banks based in India increased 3.: per cent to touch
#s )03,300 crore %(:1.1: billion*.
8/12/2019 Wd 0000000
2/18
The 5abinet 5ommittee on
8/12/2019 Wd 0000000
3/18
Total number of +IIs registered in India was 1,310 in +/ 1!.
An aggregate net investment of #s 3.0$ trillion %&'( 113.:2 billion* have been
made in shares by +IIs, since they entered the Indian market in 144.
FII Key Investments and Developments
+IIs invested around #s 34,304 crore %&'( 1).) billion* in the country"s eBuity market in
+/ 1!, according to data released by the 'ecurities and aar retail business.
Government Initiatives
8/12/2019 Wd 0000000
4/18
+IIs and 7#Is will now be able to invest in the insurance sector, within the 2 per cent
ceiling on +?I. The department of industrial policy and promotion %?I* confirmed in a
press note that the rela-ation would also apply to insurance brokers, thirdparty
administrators %TAs*, loss assessors and surveyors. The investments can be made under
the automatic route.
The 6overnment of India is planning to split overseas inflows into +oreign ortfolio
Investment %+I* and +?I, with a minimum composite ceiling of !4 per cent. The
proposal, which is under consideration by a panel headed by
8/12/2019 Wd 0000000
5/18
Foreign Institutional Investors (FIIs): Increasing rend In India
+oreign institutional investors have gained a significant role in Indian capital markets.
Availability of foreign capital depends on many firm specific factors other than economic
development of the country. In this conte-t this paper e-amines the contribution of foreign
institutional investment particularly among companies included in sensitivity inde-
%'ense-* of ombay 'tock
8/12/2019 Wd 0000000
6/18
8/12/2019 Wd 0000000
7/18
Investments in highpriority industries or for trading companies primarily engaged in
e-porting are given almost automatic approval by the #I.
FDI in India on automatic route is not allo$ed in the %ollo$ing sectors:
roposals that reBuire an industrial licence and cases where foreign investment is
more than !L in the eBuity capital of units manufacturing items reserved for the
small scale industries.
roposals in which the foreign collaborator has a previous ventureNtieup in India.
roposals relating to acBuisition of shares in an e-isting Indian company in favour
of a +oreignN7on#esident Indian %7#I*N@verseas 5orporate ody %@5*
investor; and
roposals falling outside notified sectoral policyNcaps or under sectors in which
+?I is not permitted andNor whenever any investor chooses to make an application
to the +oreign Investment romotion oard and not to avail of the automatic route.
2. FIPB Route:+oreign Investment romotion oard %+I* is a competent body to
consider and recommend foreign direct investment, which do not come under the
automatic route. 7ormal processing time of an +?I proposal in +I is ! to 2 weeks. +I
is located in the ?epartment of
8/12/2019 Wd 0000000
8/18
Factors contriuted signi%icantly to the FII %lo$s to India:
Regulation and rading %%iciencies: Indian stock markets have been well regulated by
the stock e-changes, '
8/12/2019 Wd 0000000
9/18
.ape/ .ycle: ith strong balance sheets, high liBuidity in the banking system, supportive
capital markets and growing demand for goods and services we e-pect to see a strong
wave of capital e-penditure cycle during the year leading to tremendous opportunities for
Indian eBuities.
Dollar !ea,ness: Analysts continue to look for a weak &' dollar with the &' twin
deficits %budget and trade deficits* unlikely to be resolved anytime soon. 'tudies have
shown that flows into emerging markets rise significantly during times of dollar weakness
and India will continue to be a beneficiary of this trend. Indian #upee is e-pected to
strengthen further during 00: which will be particularly favourable for domestic demand
oriented businesses such as banks and automobiles.
Rising .ommodity 0rices: ?emand supply dynamics in both crude and metals call for
higher prices during 00: with increasing 5hinese demand and economic recovery in
Capan. This has inflationary implications for India going forward, though it will be a boon
for commodity counters.
.onsolidation: +II activity has been focused on large cap companies due to liBuidity
reasons, and hence several high Buality mid cap companies trade at a valuation discount
due to lack of investor demand. e e-pect to see significant merger activity among mid
caps which will enable them to gain better valuations under the institutional radar screen,
in addition to consolidation efficiencies. hile 5hina attracts significantly higher +?I,
India with its highly developed capital markets will be a beneficiary of +II flows at
increasing pace each year. To summarise, Indian markets have successfully absorbed the
gains seen during 00) and consolidated well during 00! with a modest gain and look set
to outperform the global financial markets during 00:.
rends o% FII investment in India:
Past years FII investment in India
+II investment in IndiaG
/ear6ross purchases %#s
crore*
6ross sales %#s
crore*7et Inv %#s cr*
144) ,221.40 22.$ ,:4:.10
144! 4,23.0 ,!32.10 2,341.0
144: 2,22:.40 ,$1.0 ),$:).$01442 1:,3)4.0 !,4):.20 10,$0).20
8/12/2019 Wd 0000000
10/18
1443 1$,42.:0 1,314.0 2,03.)0
144$ 1),$44.$0 1:,)34.30 1,!34.40
1444 )3,11.:0 )0,:1!.30 2,242.$0
000 33,222.20 31,1::.!0 2,:11.0001 :2,344.0 !),:02.:0 1),4.30
00 :,!!2.00 !,3!2.30 244.)0
Total 12332145'4 &24425&5'6 772896'66
2009: FII Investment is increasing in India:
7early half of the #s 30,000 crore offshore investments that have come into Indianbourses this fiscal, till @ctober 004, are from alleged ta- havens such as Mauritius, 8ong
Oong and Fu-embourgPthe three together contributing almost #s :,000 crore of the net
inflow from foreign institutional investors %+IIs*.
'ignificant omissions from this list are +IIs of 'ingapore and 'wit>erland, the
two countries that had figured among the top five with the highest investments in Indian
eBuities during the economic slowdown of 00$. +IIs from the two countries had put in
over #s 1:,000 crore last year. The government has said there is no cause of concern on
the strong +II flow into stock markets with finance minister ranab Mukher9ee stating that
regulators were keeping a close watch on the money flow and would act if it was alarming.
Till @ctober 004, +II held eBuities totalled more than (120 billion. According to a
finance ministry statement, the highest investments have come from &'based +IIs, to the
tune of #s 1,)!! crore till 7ovember 10. 'econd on the list is Fu-embourg with #s
1,3: crore. +rance, Mauritius, the &O, &A
8/12/2019 Wd 0000000
11/18
investment of #s 1,200 crore. The top four that year included 'ingapore, 8ong Oong and
&Aation, foreign capital has
become increasingly significant source of finance.
'ince India is a labour intensive country. Therefore, in developing countries like
India foreign capital helps in increasing the productivity of labour and to build up foreign
e-change reserves to meet the current account deficit. +oreign Investment provides a
channel through which country can have access to foreign capital.
8/12/2019 Wd 0000000
12/18
It is reBuired to understand when they withdraw their funds and when they pump in
more money. 8igher 'ense- indices and high price earnings ratio are the country level
factors attracting more foreign investment in India.
This paper empirically observed that the research that market performance is the
strong basis for attracting more foreign investment for the individual companies in India.
The foreign institutional investors with draw their money when the stock market
performance starts sliding down.
8/12/2019 Wd 0000000
13/18
rie% -vervie$
The services sector has been a great stimulus to the Indian economy accounting for :2.4
per cent of the gross domestic product %6?*, wherein the financial services segment has
been a ma9or contributor. The growth of the financial sector in India at present is nearly
$.: per cent per year.
?ominated by commercial banks which have over 20 per cent share of the total assets,
India"s financial sector comprises commercial banks, insurance firms, nonbanking
institutions, mutual funds, cooperatives and pension funds, among other financial entities.
The last two decades have seen the sector developing a more contemporary outlook. The
6overnment of India has helped in this development, introducing reforms to liberalise,
regulate and enhance the country"s financial services. Today, India is recognised as one of
the world"s most vibrant capital markets. 7otwithstanding challenges, the sector"s future
seems to be in good hands.
Insurance Sector
?igital channels will influence nearly 3: per cent of the insurance policies sold by 00
during the prepurchase, purchase or renewal stages, according to a report titled
J?igitalQInsurance0R y 00" by oston 5onsulting 6roup %56* and 6oogle India.
According to the report, insurance sales from online channels will be 0 times what it is
today by 00, with overall internet influenced sales e-pected to be around #s )00,000
!00,000 crore %&'( :0.)123.02 billion*.
Indian insurance companies will spend #s 1,100 crore %&'( .01 billion* on information
technology %IT* products and services in the current year, a 1 per cent increase over 01),
according to 6artner Inc. This forecast takes into account spending by insurers on internal
and e-ternal IT services, software, hardware and telecommunications. The softwaresegment is predicted to be the fastest developing e-ternal segment, which is increasing at
1$ per cent in 01! overall, driven by the growth of insurancespecific software.
an,ing Services
Indian banks operating overseas saw higher credit growth in comparison to their foreign
counterparts operating in India, according to #eserve ank of India"s %#I* survey on
international trade in banking services. The survey for 011) showed growth of credit
e-tended by Indian banks" branches operating overseas to have increased by )1.3 per cent
to #s :$:,:30 crore %&'( 4$.1$ billion*.
8/12/2019 Wd 0000000
14/18
Increased growth in agriculture and services sectors as well as in the personal loans
segment, helped bank credit grow during the April7ovember period of 01) by 3. per
cent; during the same period of 01, bank credit growth stood at 2.2 per cent. S8igher
growth in credit to agriculture may be attributed to the e-pected better kharif crop which
has been announced by the Ministry of Agriculture,S stated the report by credit rating
agency 5A#< #atings.
+utual Funds Industry in India
More than $0 per cent of Indian investors are satisfied with their mutual fund schemes,
according to a survey by +inancial Intermediaries Association of India %+IAI*. The survey
also stated that 20 per cent of the mutual fund investors were satisfied with services of
advisers and distributors of investment schemes.
0rivate ;uity2 +ergers < Ac;uisitions in India
Mergers and acBuisitions %MA* activity between India and the
8/12/2019 Wd 0000000
15/18
+oreign investors invested about #s )31,)! crore %&'( 2.: billion* into India"s stock
market in the four years ended ?ecember 01). This figure surpasses the investments in
the boom years of 00:0$.
Investments by +IIs in the Indian stock market crossed the #s 1 trillion %&'( 12.33
billion* mark in ?ecember 01) the third time this has been achieved since +IIs" entry
into the capital market in 1444).
Financial Services in India: Recent Developments
American
8/12/2019 Wd 0000000
16/18
years for the segment, with the country"s insurable population pro9ected to touch 3:0
million by +/ 00.
8/12/2019 Wd 0000000
17/18
Introduction
8/12/2019 Wd 0000000
18/18