10 Types of Financial Services Available in India

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10 Types of Financial Services Available in India
06 Sep 2022
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The term "Financial Services" refers to a wide range of services. There are numerous opportunities available in the financial sector for candidates to find the right fit. Banking, investments, and other services are all available. So, if you're thinking about a career in financial services, you should first learn about the industry's scope before deciding which path is best for you and your skills.

Since 1990, the Indian financial services industry has undergone a transformation. Prior to its establishment, commercial banks and other financial institutions dominated the field, meeting the financial needs of the Indian industry. Only after economic liberalization did the financial services sector gain prominence. This sector has now evolved into an industry.

Financial services are products and services provided by financial institutions to facilitate various financial transactions and other related activities. Financial services are also referred to as financial intermediation. Financial intermediation is the process of mobilizing funds from a large number of savers and making them available to all those in need, particularly corporate customers.

In fact, the financial services industry is now one of the world's largest. Financial services are an important component of the financial system. A modern economy is built on financial services. The financial services sector is critical to a country's prosperity.

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Since 1990, the Indian financial services industry has undergone a transformation. Commercial banks and other financial institutions dominated the field prior to its emergence, meeting the financial needs of the Indian industry. Only after economic liberalization did the financial services sector gain prominence. This sector has now evolved into an industry. In fact, the financial services industry is now one of the world's largest. Financial services are an important component of the financial system. A modern economy is built on financial services.

The Definition of Financial Services

In general, all financial-related activities can be classified as financial services. Financial services, in a broad sense, refer to the mobilization and allocation of savings. As a result, it encompasses all activities involved in the conversion of savings into investments. Financial services are those offered by the finance industry. The finance industry includes a wide range of organizations that deal with money management. Banks, credit card companies, insurance companies, consumer finance companies, stock brokers, investment funds, and some government-sponsored enterprises are among these organizations.

The Indian financial services industry is divided into several key segments. Mutual funds, pension funds, insurance companies, stockbrokers, wealth managers, financial advisory firms, and commercial banks, among others, ranging from small domestic players to large multinational corporations. Individuals, private businesses, and public organizations are among those who benefit from the services.

These financial services are described further below:

1. Finance

The banking industry is India's financial services industry's backbone. There are numerous public sector, private sector, foreign, regional rural, and urban/rural cooperative banks in the country. This segment provides the following financial services:

  • Individual Banking (checking, savings, debit/credit cards, and so on)
  • Banking for Businesses (merchant services, checking accounts and savings accounts for businesses, treasury services, etc.)
  • Loans (business loans, personal loans, home loans, automobile loans, working-capital loans, etc.)

The Reserve Bank of India (RBI) regulates the banking sector, monitoring and maintaining liquidity, capitalization, and financial health.

Also Read: Analyse Your Finance, Set A Long-Term Goal

2. Professional Consultation

Professional financial advisory service providers are well-represented in India, offering individuals and businesses a diverse range of services such as investment due diligence, M&A advisory, valuation, real estate consulting, risk consulting, and taxation consulting. These services are provided by a variety of providers, ranging from individual domestic consultants to large multinational corporations.

3. Asset Management

This segment provides financial services such as managing and investing customers' wealth across various financial instruments such as debt, equity, mutual funds, insurance products, derivatives, structured products, commodities, and real estate based on the client's financial goals, risk profile, and time horizons.

4. Mutual Funds

Mutual fund service providers provide professional investment advice to funds comprised of various asset classes, primarily debt and equity-linked assets. When compared to the stock market and debt products, the buy-in for mutual fund solutions is generally lower. These products are very popular in India because they generally have lower risks, tax benefits, stable returns, and diversification properties. Due to its popularity as a low-risk wealth multiplier, the mutual fund's segment has seen double-digit growth in assets under management over the last five years.

5. Security

This segment's financial services offerings are primarily divided into two categories:

  • General Insurance (automotive, home, medical, fire, travel, etc.)

  • Life Insurance (term-life, money-back, unit-linked, pension plans, etc.)

Individuals and businesses can use insurance to protect themselves from unforeseen events and accidents. Payouts for these products vary depending on the product's nature, time horizons, customer risk assessment, premiums, and a number of other key qualitative and quantitative factors. There is a strong presence of insurance providers in India in both the life insurance and general insurance categories. The Insurance Regulatory and Development Authority of India (IRDAI). regulates the insurance market.

6-Stock Market

The stock market segment includes equity-linked investment solutions for customers on the Indian stock exchanges (National Stock Exchange and Bombay Stock Exchange). Customers' returns are based on capital appreciation - growth in the value of the equity solution and/or dividends - and company payouts to its investors.

7. Treasury/Debt Instruments

Investments in government and private organization bonds are among the services provided in this segment (debt). The bond issuer (borrower) provides the investor with fixed payments (interest) and principal repayment at the end of the investment period. Listed bonds, non-convertible debentures, capital-gain bonds, GoI savings bonds, tax-free bonds, and other instruments fall into this category.

8. Tax/Audit Consultation

This segment offers a diverse range of financial services in the tax and auditing sectors. Individual and business clients can be segmented in this services domain. They are as follows:

Individual Income Tax (determining tax liability, filing tax-returns, tax-savings advisory, etc.)

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Business Tax (determining tax liability, transfer pricing analysis and structuring, GST registrations, tax compliance advisory, etc.)

Service providers in the auditing segment provide solutions such as statutory audits, internal audits, service tax audits, tax audits, process/transaction audits, risk audits, stock audits, and so on. These services are required to ensure the qualitative and quantitative smooth operation of business entities, as well as to mitigate risk. More information about taxation in India can be found here.

9-Restructuring of Capital

These services are primarily provided to companies and involve the restructuring of capital structure (debt and equity) in order to increase profitability or respond to crises such as bankruptcy, volatile markets, liquidity crunch, or hostile takeovers. Structured transactions, lender negotiations, accelerated M&A, and capital raising are typical financial solutions in this segment.

10-Portfolio Management

This segment includes a highly specialized and customized range of solutions that help clients achieve their financial goals through portfolio managers who analyse and optimise investments across a wide range of assets for clients (debt, equity, insurance, real estate, etc.). These services are primarily aimed at HNIs and are classified as discretionary (investment at the discretion of the fund manager with no client intervention) or non-discretionary (decisions made with client intervention).