banking & insurance overview
TRANSCRIPT
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The Indian Economy and The Financial Sector
(Banking and Insurance) Opportunity
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Current Scenario
Drivers of Growth
Challenges
Summary
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Size and Distribution of Savings
Sources: RBI
Share of Financial Savings
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1993-94
1995-96
1997-98
1999-00
2001-02
Mutual Fund Life Insurance Government Small Savings
Currency & Deposit PF & Govt Pension
0
100,000
200,000
300,000
400,000
500,000
600,000
1993-94
1995-96
1997-98
1999-00
2001-02
5 Year 11.6%
HH Savings
(Rs Mn)
Financial Savings
Gross Physical Savings5 Year 20.2%
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Opportunities in life insurance
Life insurance pre iu as of G P
UK Japan Korea Austrlia U ala sia n ia C ina
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Opportunities in non life insurance
Non life insurance pre iu as of
ustralia orea apan ala sia ina n ia
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Retail credit opportunity
o n u e r lo a n /
o r e a a iwa n a la y ia a i la n d n d ia
Net retail NPA levels are low at about 1.6% for the Indian
banking sector as a whole and even lower for many of
the leading players
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Opportunities in asset management
ota ssets as o
ustra ia ra i orea n ia
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Opportunities in redit ard
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Current Scenario
Drivers of Growth
Challenges
Summary
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T in ro th Drivers
Demographic Transition
Economic Development
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leading to gro th in Household Financial Savings
Reducing dependency could trigger a self reinforcing savings gro th dynamic in the
next decade
Expected demographic trends suggest,in light of experience elsewhere, in thenext decade Indias national savings
could rise to 30% or more
Bulk of the savings contributed byHouseholds
Decline in share of financial savings anegative however expected to
increase with development of financialsystem and higher awareness
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Source:Based on NCAER & Govt Of India estimates
CAGR ( )
..
' ' ' ' ( )
o. ofHH (M)
< k
k k
> k
.
.
Income
Rising Income levels Increases Target Market
.
Income range based on 1998-1999 prices
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T in Gro th Drivers
Demographic Transition
Economic Development
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Services sector driving momentum Established leadership in information technology Successful forays across knowledge-based sectors
Renewed industrial growth
Operational efficiency and quality focus Supported by financial restructuring
Progress in infrastructure development Significant achievements in telecom and roads Focus on power sector
Drivers of development
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Services sector driving momentum
Leveraging rich pool of human capital
Quality educational institutions Large English speaking population
Globally-positioned IT sector Software exports of US$ 12.2 bn in FY2004 and US$ 7.1 bn in
H1-2005
International services hub Commenced with IT-enabled services : voice & data Expanded to all knowledge sectors: pharmaceuticals,
biotechnology, engineering design
Growth in financial services, travel & hospitality
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Impact of the Development
Sectoral shareofGD ( )
Sector
.Agriculture
.Industry
.Services
Gro thFY ( )
.
.
.
GD .
Source: NAS
One of the fastest growing economies in the world with
7.0% growth rate in H1-2005
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Rene ed industrial gro th
After a prolonged period of restructuring and repositioning
growing competitiveness Increasing deployment of technology
Deleveraging and organic capital generation
Constantly improving quality standards
Emergence of Indian multinationals Setting up production capacities overseas Setting up international distribution Consolidating supply chain
Indias emergence as a global manufacturing hubSecond-most favoured destination for FDI in manufacturing
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India has just started on the journey
ur e or in o e ro th in sia
ears ro start o re or s
er
a
ita
in
$
o ur e: or an tan ey
India
hi i ines
hina
ha i and
a a ysi a
oreaai an
in a or
on on
a an
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Current Scenario
Drivers of Growth
Challenges
Summary
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Challenges of Intermediation in India
Size of the country and dispersed affluent population
Lack of Data specially the area of Health
Attracting the Talent Pool
Evolving Regulatory Environment
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Challenges from lack of Data
No single customer identification number like social
security number
Single Mortality table usedNo cuts available by geography or customer segment
Health records not availableHealth incidence data or morbidity tables notdevelopedNo consolidated medical individual history available
No standard definition of conditions & surgeries
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Attracting the Talent ool
Increasing attrition levelsPoaching within & across industriesAttrition at frontline sales level around 20%
Pay hikesSalary increases grossly out pace inflationProjected increases to continue at a minimum 10-12%
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Evolving Regulatory Environment
Multiple Regulators
Pension reforms on the anvil
Tax rules in fluxCreates distortions in incentives to invest in variousfinancial instruments
Regulations still evolving as regulators gain maturity
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Summary
Strong growth prospects for the Indian Economy
Demographic transition should lead to a positivesavings growth spiral fuelling growth of financialsavings
Changing structure of savings could lead to increase inallocation to Insurance & Banking instruments
Need to manage unique intermediation challenges of
operating in India
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Thank you