Financial Services
Highlights of the Financial Services sector in Q1 FY2024
20 Sep 2023
In the following section, we are covering trends / key highlights in the financial services sector for Apr’23 – Jun’23 across the following sub-verticals:
  • Banks and NBFCs
  • Broking and Capital Markets
  • Cards and Payments
  • Insurance
  • Gross bank credit increased to ~INR 148T in Jun’23 as compared to ~INR 127T in Jun’22 at a y-o-y growth rate of ~16%, while deposits increased to ~INR 196T in Jun’23 as compared to ~INR 174T in Jun’22 at a y-o-y growth rate of ~13%
  • Credit growth to the services sector accelerated to 27% in Jun’23 from 13% in Jun’22, primarily due to higher loans to NBFCs
  • Personal loans registered a growth of 21% in Jun’23 as compared to 18% in Mar’22, primarily due to growth of credit cards, education, and vehicle loans
  • Total active clients for all stockbrokers of NSE decreased to 30.9M in Jun’23 from 32.7M in Mar’23 with Zerodha serving 20% of the total clients followed by Groww (18%) and Angel One (14%). One of the reasons for this decline is the normalisation in active clients after a huge surge in new accounts being opened in the past two years. Large players like Upstox, 5Paisa, ICICI, IIFL, etc. saw fall in their active client base thus impacting the overall numbers
  • Net AUM for Mutual funds increased to INR 45T at the end of Jun’23 from INR 40T at the end of Mar’23; direct plans accounted for 46% of the AUM
  • Number of trades increased to 432M (turnover ~INR 13.1T) in Jun’23 as compared to 377M (turnover ~INR 10.3T) in Mar’23 in the capital market; In the F&O segment, turnover increased to INR 32.9T in Jun’23 as compared to INR 36.5T in Mar’23
  • UPI transaction volumes saw a sharp rise to 9,443 transactions (~INR 15T in value) in Jun'23 as compared to 8,791M in Mar'23 (~IN 14T in value)
  • Debit card transaction volume (excluding cash withdrawal) decreased to 210M (~INR 0.5T value) in Jun'23 as compared to 238M (~IN 0.5T value) in Mar'23. Increasing preference of UPI by customers (ease of not carrying a card/wallet) and merchants (not deploying POS terminals and paying MDR) over debit card can explain the continuous fall
  • Credit card transaction volume decreased to 263.6M (~IN 1.38T value) in Jun'23 as compared to 264.3M (~INR 1.4T value) in Mar'23. Credit cards overtook debit cards both by value and volume
  • Sale of life insurance policies increased 18% y-o-y to ~3.7M (with LIC having ~68% market share) in Jun’23; the policies covered ~30M lives under group scheme
  • For non-life insurance policies, gross underwritten premium increased 14.8% y-o-y to INR 205B in Jun’23 (against INR 178B in Jun’22)

  • IRDAI allowed insurance companies to launch combi products (combination of life and health insurance plans) and ULIPs (individual and group) without seeking prior approval from the regulator under the use-and-file procedure
  • With effect from May 1, 2023, SEBI prohibited stockbrokers and clearing members in India to use their clients' funds for bank guarantees
  • RBI announced the withdrawal of INR 2,000 denomination banknotes from circulation in pursuance of its “Clean Note Policy”. Further, banks have been directed to provide deposit and/or exchange facilities for these notes till September 30, 2023
  • RBI authorized insurance companies to operate in the trade receivable discounting system (TReDS) as the fourth category of participants in addition to MSME sellers, buyers, and financiers

  • Swiggy partnered with HDFC Bank to launch a new co-branded credit card powered by Mastercard in a move to capitalize on their loyal user base by giving them additional discounts
  • Kotak Mahindra Bank and NPCI announced that bank's customers can now use their RuPay credit card on UPI with UPI-enabled apps
  • RBI approved the issuance of RuPay Prepaid Forex cards by banks in India that can be utilized at ATMs, PoS machines, & online merchants abroad
  • Punjab National Bank (PNB) recently unveiled UPI 123PAY, an IVR-based UPI solution that is aimed to propel the nation towards a society that is both cashless and cardless in line with the ‘Digital Payment Vision 2025’
  • Google Pay introduced Aadhaar-based authentication to facilitate UPI activation with which Google Pay users can set their UPI PIN without the need for a debit card
  • Groww introduced UPI payments through its 'Pay' feature enabling users to make P2P and merchant payments by simply scanning their QR codes
  • Coinswitch to launch a service for the trading of Indian stock conventional investment products like mutual funds, US stocks, etc., widening its scope beyond cryptocurrencies. It is also in talks with SEBI to apply for a broking license, and with NBFCs and banks for offering fixed deposits.
  • Neo-banking fintech Jupiter has been awarded an NBFC license by RBI, which could help the neo-bank scale its digital lending operations

  • A leading foreign bank in India wanted a roadmap for its dealer finance business for the next 5 years.
  • They wanted to understand the growth opportunities in the market and a strategy to tap into those opportunities

  • Market opportunity and growth assessment: Estimated the total current market size of dealer finance in India across different sectors by taking into consideration different channels of sales; also projected the 5-year market outlook by assessing the growth drivers.
  • Discussion with different functional teams of client: Held discussions with different functional teams across product, sales, risk management, client servicing and tech teams of the client to understand their current process and pain points.
  • Understanding the industry best practices: Benchmarked different banks, NBFCs and fintechs on various parameters like the product, target anchors and dealers, onboarding, usage and collections processes, team structure along with their incentive mechanism and risk management practices.
  • Evaluating the needs of the stakeholders: Conducted discussions with dealers and anchors to understand their key selection criteria in partnering with banks, pain points faced by them, overall journey experience with different players and brand perception of the client.
  • Defining the initiatives: Designed a growth strategy by analyzing the insights derived from market assessment, competitive benchmarking and stakeholder requirements to enhance product and processes
  • 5-year blueprint: Defined 5-year aspiration and strategy to achieve the same along with a detailed business plan
    • Defined 5-year aspiration and strategy to achieve the same along with a detailed business plan

  • Defined the aspirations for the client for the next 5 years in terms of product mix, AuM and throughput along with estimated costs and revenues each year.
  • Outlined 10 key initiatives for the whitespaces identified that the client should focus on to achieve the 5-year aspiration:
    • Recommended changes in the program construct and organization structure to make it more suitable for the target customers and in line with the peers.
    • Identified >1K potential anchors and other possible partnerships with whom they can partner for dealer finance.
  • Identified process improvements for faster onboarding and processing for dealers as well as anchors

  • The leading specialized NBFC wanted to grow its presence and enhance its business in high-potential areas by:
  • Assessing the potential of existing locations for business expansion and prioritizing them accordingly for launching a new channel
  • Identifying suitable locations/districts for new branches

  • Identified districts with high potential across offered products of the NBFC
  • Identified cross-sell opportunities for existing branches with unserved, high-opportunity products and low existing market penetration
  • Created a prioritization model by calculating the potential of each branch in the district based on opportunity and existing business performance
  • Also identified new districts for the client to expand into based on market potential
  • Designed a manpower / staffing plan for the shortlisted branches based on opportunity and aligned that with the client’s proposed budget and annual plan

  • Shortlisted and prioritized >220 existing branches of the NBFC in 3 phases for the launch of a new channel to cater to cross-sell opportunities along with a 6-month staffing plan
  • Identified 2 districts with high opportunity for the NBFC to expand its offline footprint

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