What drives interest for financial services in developing markets?
Introduction • Policy-friendly central government, key initiatives such as Housing-for-All, impetus on the infrastructure sector, young demographic dividend, and high disposable income have driven the India growth story in the past decade. • Today, India provides a huge potential market for top banks, insurance companies, and asset managers who are looking at expanding their business frontiers.
• Financial services providers have played an important role in driving investment in India. Private financial services players, which include foreign banks and insurance companies, have started finding good expansion opportunities in India. • This is despite the continuing dominance of state-owned financial institutions in India’s banking industry and capital markets. The market share of foreign banks is much smaller compared to the local peers, with their main focus being M&A advisory services and trade finance.
• That said, foreign banks have made good headway into the Indian markets despite regulatory restrictions, largely through de novo expansion. • Going forward, foreign banks will likely create wholly-owned subsidiaries with the regulators focusing more on reducing systemic risk. • Emerging markets such as India with higher-than-average economic growth rate have served as ideal foil for the emergence of an educated middle class. • This middle class has played a pivotal role in the growth of the financial services industry in India. • They are willing to explore financial services products, try financial planning services, and invest in financial derivatives market under the guidance of expert financial services professionals.
• The fact that stands out for this growing middle class group in India is that they constantly aspire to achieve a more affluent lifestyle that matches global standards. • Key elements of the financial services industry such as traditional depository, credit, insurance, and investment products play a pivotal role helping them achieve their dream lifestyle.
• In fact, the growing Indian middle class group is not just expanding the local demand, but is also pushing the global demand for financial services upwards. • Today, many top established global financial services providers aspire to find their mark and carve their niche in the Indian markets.
• Top financial services companies are increasingly looking to capitalize on the growth opportunities emerging nations such as India has to offer. • Attractive growth rates, limits on domestic growth, and scope for diversification of revenue are contributing immensely to the growth of the financial services industry in India.
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