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Different Financial Services However, we expect margins to sustain as loans get reprised faster than deposits.

Thus sustainable margins with upward bias, healthy credit demand and containment in the slippages and provisions will make Indian banking system stronger going forward. 2. Non-banking Financial Services Non-banking financial companies N!"#s$ are fast emerging as an important segment of the Indian financial system. It is an heterogeneous group of institutions other than commercial and co-operative banks$ performing financial intermediation in a variety of ways, like accepting deposits, making loans and advances, leasing, hire purchase, etc. They raise funds from the public, directly or indirectly, and lend them to ultimate spenders. They advance loans to the various wholesale and retail traders, small-scale industries and self-employed persons. N!"# are present in all competitive fields such as, vehicle financing, housing loans, leasing, hire purchase and personal loans financing etc. N!"#%s are not re&uired to maintain cash reserve ratio #''$ and statutory li&uid ratio ()'$. *riority sector lending norm of +,- of total advances$ is not applicable to them. .hile this is at their advantage, they do not have access to low cost demand deposits. /s a result their cost of funds is always high, resulting in thinner interest spread. !ut currently with surplus li&uidity in the system, the cost of funds for N!"#%s has substantially eased thus improving their margins. 0radually, they are being recognised as complementary to the banking sector due to their customer-oriented services1 simplified procedures1 attractive rates of return on deposits1 flexibility and timeliness in meeting the credit needs of specified sectors1 etc. 2n regulatory front, N!"#s have been classified into 3 categories4 a$ those accepting public deposits, b$ those not accepting public deposits but engaged in financial business and c$ core investment companies with 5, per cent of their total assets as investments in the securities of their group6 holding6subsidiary companies. The focus of regulatory attention is on N!"#s accepting public deposits. 3. Insurance India is the 7th largest market in /sia by premium following 8apan, 9orea, #hina and Taiwan. In life insurance segment, India stands at fifth position in the emerging insurance economies globally and the segment is growing at a healthy 3:-3+ per cent annually, according to the )ife Insurance #ouncil. /ccording to the Insurance 'egulatory and ;evelopment /uthority I';/$, total first year premium collected in :,,5-<, was =(> :+.?+ billion, an increase of :7.+? per cent over =(> <5.?+ billion collected in :,,@-,5. "urther, according to I';/, in /pril :,<,, life insurance companies collected first year premium worth =(> <.:5 billion, as compared to =(> @<,.5 million in the corresponding period of :,,5. The life insurance industry grew by around ?, per cent in new business in the first half of :,<,<< despite a slowdown in sales in (eptember, according to data compiled by life insurance companies.

In (eptember, the industry grew by :, per cent on a year-on-year basis collecting =(> :.<+ billion in new business premium. However, the new business in (eptember was almost +@ per cent lower than the previous month%s collection. The life insurance industry is expected to cross the =(> ??.@ billion total premium income mark in :,<,-<<. AThis year, we are expecting a growth of <@ per cent in total premium income. Total premium income, at =(> 7?.,+ billion, rose <@ per cent during :,,5-<,, against =(> +B.? billion in the previous year. In the fiscal year ending Carch 3<, :,<,, total premiums in India amounted to =(> ?+.B billion. This included non-life premiums of =(> B.BB billion and life premiums of =(> 7?.5 billion. In the fiscal year ending Carch 3<, :,<7, the corresponding figures should be =(> <,7.+ billion, =(> <+.? billion and =(> 5,.@ billion. In terms of the key drivers that underpin our forecasts, we are looking for non-life penetration to rise from ,.75- of 0;* in the fiscal year ending Carch 3<, :,<, to ,.?<- in the Carch :,<7 fiscal year. .e expect that life density will rise from =(> +B per capita to =(> @7 per capita. Taking the recent infrastructure related developments in consideration and the booming automobile industry in India as a parameter1 we foresee the potential of the insurance sector in India. 4. Stock Markets #apital market is one of the most important segments of the Indian financial system. It is the market available to the companies for meeting their re&uirements of the long-term funds. It refers to all the facilities and the institutional arrangements for borrowing and lending funds. In other words, it is concerned with the raising of money capital for purposes of making long-term investments. The market consists of a number of individuals and institutions including the 0overnment$ that canaliDe the supply and demand for long -term capital and claims on it. The demand for long term capital comes predominantly from private sector manufacturing industries, agriculture sector, trade and the 0overnment agencies, while the supply of funds for the capital market comes largely from individual and corporate savings, banks, insurance companies, specialiDed financing agencies and the surplus of 0overnments. /ccording to I#I#I (ecurities, Indian companies are likely to raise up to =(> +:.+3 billion from the primary market over the next three years. /ccording to Cadhabi *uri-!uch, Canaging ;irector and #E2, I#I#I (ecurities% nearly =(> :, billion will be raised from the initial public offer I*2$ market this fiscal :,<,-<<$, of which around =(> @.+5 billion would be from the public sector and an e&ual amount from private companies. 2n the back of an increase in the participation of agriculture and other commodities, the :3 commodity exchanges posted 7, per cent year-on-year growth in turnover in the /pril-"ebruary period of :,,5-<,, to touch =(> <.73 trillion, according to the commodity markets regulator, "orward Carkets #ommission "C#$. 5. Mergers & Ac uisition Services The competitive and regulatory pressures for consolidation are leading to a rapid increase in CF/ activity, with more than >3?.7 billion worth of deals announced till Cay :,<, end. (uch activity is likely to accelerate still further as international groups seek to establish foothold. The deals have been pouring in India this year and the ones which help companies merge, ac&uire,

raise capital and restructure are naturally in great demand. (enior Indian deal-makers are being snapped up by foreign investment banks with a speed and alacrity that is usually reserved for actual corporate deals. !. "ack of ualifie# $ersonnel There is a dearth of &ualified and trained personnel F it is an important impediment in the growth of financial service sector. / proper and comprehensive training is needed to be given to various financial intermediaries. 2. "ack of investors a%areness Cany innovative financial products6instruments are coming in market but the investors are not aware about their advantages. Hence, financial intermediaries need to educate investors about various products. 3. "ack of s$eciali&ation Each financial intermediary is dealing in different financial service lines without specialiDing in one or two areas as is the condition in foreign countries. Hence financial intermediaries have to go for such specialiDation. 4. "ack of recent #ata Cost of the intermediaries do not spend more time on research and lack ade&uate data base re&uired for financial creativity. 5. "ack of efficient risk Manage'ent s(ste' .ith the opening up of economy to Cultinationals and exposure of Indian companies to international currency transactions exposing the client to exchange rate risk, interest rate risk, economic and political risk. Hence it is essential that they should introduce futures, options, swaps and other derivative products which are necessary for an effective risk management system.