MBA In Financial Markets: India, along with emerging economies like China, Brazil and Russia are expected to power the global economy in the next few decades. Factors like liberalization, globalization and the emergence of a strong and aspirational middle class are the key drivers of this development.
MBA In Financial Markets – Industry Overview
India’s banking sector is a study in contrast: it supports the world’s fastest-growing large economy but is grappling with the challenges that test its strength and resilience, primary among them is the burden of distressed loans. According to the Reserve Bank of India (RBI) data, the value of banks’ gross nonperforming assets (GNPA) and restructured assets reached $150 billion in April 2016 and has been growing by almost 25% year on year since 2013. Yet headline numbers do not tell the entire story, and there are many layers to the changing face of banking and finance in India.
Even as public sector banks continue to be under pressure from stressed assets and stagnant loan growth, the sector as a whole represents one of the world’s biggest opportunities to create value in banking. Macroeconomic fundamentals continue to be strong, and the country is in the midst of a digital revolution with the advent of demonetization, which has led to the emergence of paperless money and the platforms that support a cashless economy.
The Indian government’s twin thrusts — to encourage digital identification and cashless transactions — are driving change throughout the economy. In addition to the push for digitization, new policies favor financial inclusion and promote competition by allowing new domestic players to set up payments banks (which can only accept deposits and cannot issue loans or credit cards) and small-finance banks (which provide basic banking services to underserved sections of the economy). The further easing of norms, such as permission to set up wholly owned subsidiaries, makes it easier for foreign banks to enter India’s banking sector. Although processes are still evolving, regulatory interventions point to the emergence of a digital, inclusive, and interoperable financial-services market in India.
Notwithstanding the sectoral gloom, India’s macroeconomic fundamentals continue to be strong. GDP has increased from 6.6 to 7.0 percent over the past four years, and International Monetary Fund projections show an upward trend — growth could reach 7.7 percent by 2020. Considering this, the Banking Industry is expected to grow at a healthy rate in the coming years. According to industry experts, while Retail banking will be the key growth area for banks, other areas like Corporate Credit, SME Banking, cross-selling of other financial products and services like Insurance, Mutual Funds, fee-based sources of income, and technological up-gradation will also be significant growth drivers.
MBA In Financial Markets Key Observations:
- Credit off-take has been surging ahead over the past decade, aided by strong economic growth, rising disposable incomes, increasing consumerism, and easier access to credit. As of Q3 FY18, total credit extended surged to US$ 1,288.1 billion.
- Credit to non-food industries increased by 9.53 percent reaching US$ 1,120.42 billion in January 2018 from US$ 1,022.98 billion during the previous financial year.
- Demand has grown for both corporate & retail loans; particularly the services, real estate, consumer durables & agriculture allied sectors have led the growth in credit.
- The asset management industry in India is among the fastest-growing in the world. As of November 2017, 42 asset management companies were operating in the country.
- At the end of March 2018, the assets under management of the mutual fund industry stood at Rs 21.36 lakh crore (US$ 331.42 billion).
- India registered a record inflow amount of US$ 51.02 billion in mutual funds in FY 2016- 17. According to the Association of Mutual Funds in India (AMFI) data, this was the highest investment in mutual fund schemes since fiscal 1999-2000.
- The number of mutual funds (MF) portfolios has increased to 66.5 million as of December 2017, backed by rising interest in MFs among investors.
- Mutual fund (MF) equity portfolios in India reached a 10-year high of 49.3 million, by end of 2017.
- The Association of Mutual Funds in India (AMFI) is targeting a nearly five-fold growth in assets under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a more than three times growth in investor accounts to 130 million by 2025.
- India’s mobile wallet industry is estimated to grow at a Compound Annual Growth Rate (CAGR) of 150 percent to reach US$ 4.4 billion by 2022 while mobile wallet transactions to touch Rs 32 trillion (USD 492.6 billion) by 2022.
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