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The market

  • Savings to GDP ratio in India has been increasing since independence and has crossed 39.1 in FY09.
  • Credit extended by the Indian banking sector grew by 16.7 percent at the end of March 2010.
  • India’s market cap as a percentage of world market cap was 2.8 percent as on December 31, 2009.
  • India is the fifth largest life insurance market in the emerging insurance economies globally and the segment is growing at a healthy 32-34 percent annually.

Opportunities

Banking

  • Total banking assets expected to grow to USD 2764.6 billion by FY14.
  • In Union Budget FY11, RBI has proposed to accord more banking licenses.
  • Other Opportunities – SME Finance, Agri and Rural Finance, Institutional.

Insurance

  • Non-Life Insurance – Projected market size of USD 12 billion by 2010.
  • Life Insurance – Life insurance market is expected to grow at a CAGR of 15 percent over next 5 years to USD 98 billion.
  • Opportunities in areas of health insurance, motor insurance, unit-linked insurance etc.

Asset management companies

  • Asset Management – Mutual funds AUM expected to grow at a CAGR of 17 percent in to become a USD 297.5 billion industry by FY14.
  • Other opportunities include wealth management, pensions, investment banking, etc.

Emerging opportunities

  • Private equity and venture capital, structured finance, distressed assets, real estate finance, leveraged finance, ancillary services (IT, Consultancy, Training).

Industry Snapshot

Banking Insurance Asset Management Companies
Size Total assets of USD 1105.35 bn in FY10 Life insurance – USD 56.1 bn in FY10 USD 157.6 bn in FY10
Size (Projected) 13 percent 14.2 percent
Regulatory Total assets of USD 2764.6 bn in FY14 Life insurance – USD 98.2 bn by FY14 USD 297.5 bn for FY14
Projected CAGR 16 percent during FY10-FY14 15 percent (Life insurance) during FY10-FY14 17 percent during FY10-FY14
Regulatory Foreign ownership in private banks allowed upto 74 per-cent (including FII ownership) , with a 5% cap on ownership by any one entity • FDI upto 26 percent
• Allowed under automatic
• Route subject obtaining
• License from IRDA
Up to 100 percent investment in Indian Asser management companies is allowed, subject to regulatory approvals
Volume vise Bank credit expected to grow at a CAGR of 18 percent between FY10-FY14 to reach USD 1823.8 bn Penetration levels expected to touch 4.4 percent from the current level of 4 percent by FY10 AUM as a percentage of GDP is expected to rise from 13 percent in FY09 to 20% by FY20

Note: AUM & Total Premium has been used as a metric for Asset Management Companies & Insurance Companies, respectively
Source: BMI, Edelwiess Research

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