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Top 10 Types of Financial Services Offered in India

22 Feb 2023
7 MIN READ
The term "financial services" is an umbrella concept for a range of financial services provided by the industry. Owing to its sheer massiveness in the number of services provided and the demand drivers, the financial services sector in India is witnessing an upward trajectory. With numerous job opportunities available, a simple financial analysis course can […]
Types of financial services

The term "financial services" is an umbrella concept for a range of financial services provided by the industry. Owing to its sheer massiveness in the number of services provided and the demand drivers, the financial services sector in India is witnessing an upward trajectory. With numerous job opportunities available, a simple financial analysis course can put you on the track to success in the field of finance as a financial analyst

What are financial services?

All services related to money are considered financial services. Banking, mortgages, credit cards, payment services, tax preparation and planning, accounting, and investing are types of financial services industries. Financial services are frequently the exclusive domain of businesses and professionals.

Why Financial Services are Important?

Efficient operation of the economy depends on the financial services. Financial services enable people to make big purchases and save for the future. It allows for the free flow of capital and market liquidity. The economy expands, and businesses in this area are better able to manage risk when the sector is robust. It also allows a proper framework to function during financial planning. It’s a high-growth sector with ample job opportunities. The current financial regulatory framework is often criticised due to its incompleteness, demanding it to be reformed.

Understanding the Indian Financial System

The Indian financial system is primarily divided into two segments: banks and non-banking financial institutions. These two segments also come with subcategories. Under banks are the commercial and cooperative ones. The commercial banks are divided into schedule and non-schedule banks. The schedule banks consist of public sector banks, private sector banks, foreign banks, regional rural banks, small financial banks, and payment banks. Whereas local area banks are classified as non-scheduled banks.

The non-banking financial institutions, or NBI, consist of All India Financial Institutions (AIFI), NBFCs, Primary Dealers, Credit Information Companies. All India Financial Institution consist of bodies such as NABARD, EXIM, NHB, SIDBI, and MUDRA. 

Types of financial services

Types of Financial Services in India

The Indian financial services industry consists of many segments and crucial sub-segments. Here are some of the major types of financial services in India:

  • Banking

    The financial services sector in India is anchored by the banking sector. Numerous banks from the public, private, foreign, regional rural, and urban/rural cooperative sectors exist throughout the nation. Individual banking, business banking, and loans are some of the financial services provided under this segment. The Reserve Bank of India (RBI) oversees and maintains the liquidity, capitalization, and financial stability of the banking system.

  • Professional Advisory

    In India, there is a strong presence of professional financial advising service providers who offer a variety of services to both people and businesses, including investment due diligence, M&A counselling, valuation, real estate consulting, risk consulting, and tax consulting. Numerous service providers, from small domestic consulting firms to huge multinational corporations, provide these services. This is one of the more common types of areas in financial services.

  • Wealth Management

    According to the clients' financial objectives, risk tolerance, and time horizons, financial services offered within this segment include managing and investing customers' wealth across a variety of financial instruments, encompassing real estate, commodities, loans, stock, mutual funds, insurance, derivatives, and structured goods. Any finance enthusiast must also familiarise themself with the advantages of financial risk management

  • Mutual Funds

    Providers of mutual funds offer expert investment services for funds made up of several asset classes, usually debt and equity-linked assets. Due to their typically lower risks, tax advantages, predictable returns, and qualities of diversification, these products are particularly popular in India. Due to its popularity as a low-risk wealth multiplier, the mutual fund market has seen double-digit growth in assets under management over the last five years.

  • Insurance

    This type of financial service falls under personal finance. General insurance and Life insurance are the two main categories of financial services offered in this market area. Solutions for insurance give people and businesses protection from accidents and unanticipated events. Pay-outs for these products depend on a number of important qualitative and quantitative factors, including the product's type, time horizons, customer risk assessment, premiums, and others. The Insurance Regulatory and Development Authority of India (IRDAI) oversees the insurance industry. 

  • Stock Market

    The stock market segment offers a variety of equity-linked investment solutions for users of the National Stock Exchange and Bombay Stock Exchange in India. Customers' returns are based on capital appreciation, which is growth in the equity solution's value and/or dividends, as well as payments made by businesses to their investors.

  • Treasury/Debt Instruments

    Investments in bonds issued by governments and commercial organisations are among the services provided in this category (debt). At the conclusion of the investment period, the bond issuer (borrower) gives the investor fixed payments (interest) and principal repayment. Listed bonds, non-convertible debentures, capital-gain bonds, GoI savings bonds, tax-free bonds, etc. are some examples of the different types of instruments in this area.

  • Tax/Audit Consulting

    This market encompasses a broad range of financial services in the areas of tax and auditing. Based on the clientele they serve, businesses and individuals, this service domain can be divided into: individual tax (calculating tax obligations, submitting tax returns, receiving tax-savings advice, etc.); Business tax (Determining tax liabilities, structuring and analysing transfer prices, registering for GST, providing tax compliance advice, etc.). Services in the auditing sector include statutory audits, internal audits, service tax audits, tax audits, process and transaction audits, risk audits, stock audits, etc. 

  • Capital Restructuring

    These services, which are largely provided to businesses, include changing capital structures (debt and equity) in order to increase profitability or address emergencies like bankruptcies, volatile markets, liquidity shortages, or hostile takeovers. In this market, complex deals, lender negotiations, rapid M&A, and capital raising are typical examples of financial solutions. The types of financial solutions in this segment typically include structured transactions, lender negotiations, accelerated M&A and capital raising. 

  • Portfolio Management

    Through portfolio managers who assess and optimise investments for customers across a wide range of assets, this segment offers a highly specialised and tailored variety of solutions that help clients achieve their financial goals. These services are non-discretionary and broadly targeted at HNIs.

Top Financial Services companies

  • Mahindra and Mahindra Financial Services Ltd.
  • HDB Finance Services
  • Bajaj Finance Ltd.
  • IDFC First Bank Ltd.
  • Muthoot Finance Ltd.
  • Tata Capital Financial Services Ltd.
  • Aditya Birla Finance Ltd.
  • Cholamandalam Investment & Finance Company Limited
  • L&T Finance Holdings Ltd.

Merits & Demerits of Indian Financial Services

Types of financial services

Merits Demerits
Economic Development: Indian financial service promotes economic development by funding development projects from government and private bodies. Time-consuming processes: Financial institutions have a strict application process that requires a tonne of paperwork. The process becomes costly and time-consuming as a result.
Development of Infrastructure: The creation of the Indian financial system strengthens an economy's banking infrastructure. In addition, it provides all the financial services required for the growth and promotion of other infrastructures. Borrower’s Restrictions: The borrowing company's authority is limited by the financial institutions' right to appoint a representative to the Board of Directors. 
Employment Opportunities: A country's infrastructure and industry can be built and developed with the help of financial institutions. The available labour gets new job opportunities as a result. System of Collateral Securities: Financial institutions must only provide loans in exchange for certain types of security under the government's tight regulations. As a result, deserving organisations can miss out on financial support because of a lack of security.

Why Financial Planning is Essential for Business?

Considering the various types of financial services, financial planning is crucial since it aids companies in achieving their objectives. It identifies and prioritises the financial objectives of your company and improves decision-making in order to meet the objectives. You must adjust your financial plan as you create it to account for the financial objectives of your company. The financial plan acts as a road map for achieving the goals, which are determined based on the business's purpose. However, make sure that the objectives you set for your company are smart. Therefore, having a financial plan helps businesses succeed financially. A simple guide to concepts of financial modelling can help you navigate better. 

Conclusion

Like any other sector, the Indian financial system and types of financial services have their own set of merits and demerits. It depends on one’s own analysis and study of the subject matter and the benefits availed by them. FinTech trends are revolutionising financial sector, and is not expected to slow down any time soon.

FAQs

  1. What is financial services and its types?

    Financial services are the economic services provided by the finance industry. In general, all types of activities which are of financial nature may be regarded as financial services types. It encompasses a broad range of businesses that manage money. Broadly there are three general types of financial services: personal, consumer, and corporate.

  2. What is the role of banks in providing financial services in India?

    The banks help get the required funds and also make sure that they are efficiently invested.

  3. Are there any government-run financial services in India?

    Yes, the Pradhan Mantri Jan Dhan Yojana (PMJDY) is one such service.

  4. How do I invest in the stock market in India?

    You need to first open a Demat Account, select the shares, select the price and complete the transaction.

  5. Are there any insurance products available in India to protect my financial assets?

    Asset protection insurance was developed to safeguard people who are susceptible to severe legal actions that endanger your financial security.

  6. How do I transfer money from India to another country?

    Electronic transfers between banks that are a part of the SWIFT worldwide network are called wire transfers, also referred to as SWIFT transfers. Money can be transferred via electronic transfer in an average of 3-5 business days from one bank account to another bank account anywhere in the world.

  7. What are the regulations and laws governing financial services in India?

    The Insurance and Development Authority (IRDA) and the Securities and Exchange Board of India (SEBI), respectively, are in charge of overseeing life insurance firms and mutual funds.

  8. Can non-residents avail financial services in India?

    Yes, international visitors can open a Non-Resident (Ordinary) Rupee (NRO) account with any bank that deals in foreign currency during their brief stay in India.

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