Over the past few years, India has been undergoing rapid growth in the financial sector. Not only the existing financial service firms growing but also new firms are taking a swing at the growth opportunity and entering the market.
The sector is the heart of India’s economy and is made up of insurance companies, commercial banks, non-banking financial corporations, mutual funds, pension funds, co-operatives, and many others.
But what services do these institutions provide to their customers? This is what we will explore in this article.
Overview of Financial Services
The easiest way to define financial services is by stating that these are the organizations that provide insurance, loan, asset management, trading services, etc. these services could be related to assisting with dealing in financial instruments or proving any advisory services.
The competitive factor for each of these financial service companies is how well they can design and deliver their products to the customers.
And for each service they provide, the companies will charge a fee to their customers. In the present state of the country, insurance companies are sort of leading the financial sector.
Features of Financial Services
Below are certain features of the financial services provided by different institutions. In most cases, the feature does tend to be the same, just the delivery matters. Find the list below:
Intangible: The products provided by these institutions are in the form of services, thus intangible.
Customer-oriented: The services are completely customer oriented, thus the products are continuously developed and customized to meet the requirements of their clients.
Dynamic: the delivery and result of the services are completely dynamic, which is dependent on socio-economical factors. And as these factors keep on changing, the income from these services can also be dynamic for the clients.
Link: The institutions and their services act as a link between the investors/customers and the borrowers/firms.
Mitigating Risks: The financial services institutions are the provider of multiple services and have experience in the field for years.
This allows the professionals to detect the profits and risks, thus, the investors who take up their services can receive aid in the proper distribution of risks associated with investments and financial planning.
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Broad categorization of Financial Services
Financial services have multiple facets, thus, below is provided a more broad categorization of these services. It gets narrowed down in the further article. As of now, financial services are categorized into four broad segments:
Retail services: These services are for direct consumption.
Capital market services: The capital market services consist of lending professionals aiding the investors with long-term funds.
Wholesale services: These services are mostly provided to corporate institutions to be converted into retail services either indirectly or directly.
Money market services: The major services provider of these products is financial institutions, commercial banks, and cooperative banks providing short-term funds.
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10 Types of Financial Services
Below ten types of financial services are discussed. Some like to refer to them as separate branches and others categorize them as fund-based and fee-based services.
The fund-based services require asset managers to acquire funds or particular assets for their clients.
The fee-based financial services are provided by financial institutions that are in the field of products against which they earn some form of commission, dividend, or brokerage.
Asset Management
Asset management refers to providing financial services to clients looking for professional management of their assets. Apart from managing, they can also help with investing in multiple assets across many industries and sectors.
Audit Consultation/Tax
In the areas of tax and auditing, this segment provides a wide range of financial services. The service provider will offer assistance with both individual and company income taxes.
In addition to this, businesses may gain from solutions like statutory audits, internal audits, process/transaction audits, risk audits, stock audits, service tax audits, and tax audits, among others.
Banking/Finance
The banking sector is termed the backbone of financial services in India. In this type of financial services, there is the general banking services, credit/loan facilities, and banking for business.
And the sector is monitored and regulated by the national bank of India, RBI (Reserve Bank of India).
Debt Instrument/Treasury
This section offers a variety of services, including investments in government and corporate bonds (debt). After the investment period, the bond issuer (borrower) repays the investor’s principal plus fixed interest payments.
Insurance
Services under the insurance sector give people and businesses protection from accidents and unanticipated events.
The payouts for these products depend on a few important qualitative and quantitative factors, including the product’s type, premiums, time horizons, client’s risk appetite, and others.
Mutual Funds
Mutual funds are pooled funds put together to invest in certain assets. And since the asset managers are seasoned participants in the financial markets, they will evaluate the client’s requirements.
Based on that invest across various asset classes like equity-linked assets and primary debt.
Portfolio Management
Portfolio management allows investors to get wide exposure to the financial market.
Each client gets a personal manager who will work to build and manage the perfect portfolio to meet their financial objectives. These services are highly customizable and specialized.
Professional Consultation
These services are offered by a range of companies, from small domestic consulting firms to huge international conglomerates.
The spectrum of services includes M&A counselling, real estate consulting, investment due diligence, valuation, risk consulting, and tax consulting.
Restructuring of Capital
Restructuring of capital is the type of financial service provided by professionals to companies to meet unprecedented events like market volatility, hostile takeovers, bankruptcy, or liquidity crunch.
It could also be applied for general operational profitability purposes. The most common services under this type are capital raising, accelerated M&A, lender negotiation, and structured transactions.
Stock Market
The stock market has participants who are interested in investing in equity-linked assets. The return on these assets depends on capital appreciation and investment income.
To ensure the highest payouts, investors can take advice from professionals like stockbrokers.
Significance of Financial Services
The existence of these financial institutions encourages saving, investing, and other financial behaviors. Consequently, the benefits of financial services are highlighted by the following points:
Promotes Saving
Financial services like mutual funds provide a saving opportunity for all types of investors. It can be used for pensioners and even for retired individuals to have a regular income with little to zero risks.
Promotes Investment
Financial services even include stock market trading. Thus, if there are investors out there who want to invest in shares but do not have the right resources to make it happen, they can use financial services to conveniently buy and sell shares under professional guidance.
These services will even help the companies to issue fresh shares and even raise funds.
Maximum Returns
The financial services allow investors and businesses to get credit facilities at reasonable rates. And even when the professionals help them with making financial decisions, the results are positive.
Minimum Risk
The financial sector is a volatile area. Thus, insurance services allow investors and other customers to get financial coverage for this type of risk.
Conclusion
Due to its substantial banking and insurance industries, India has one of the most dynamic economies today. In the last several years, the financial services sector in India has grown significantly.
This momentum is anticipated to endure. The private wealth management sector in India has a lot of promise.
As a result, if you’re interested in these services, use the information in this article to identify the best option for you before giving it a thorough test run.
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