The year 2015 saw major policy initiatives as well as internal restructuring in the banking, microfinance (MFI) and insurance sectors. While the Reserve Bank of India (RBI) gave in-principle nod to 21 entities to set up banks in the country, the insurance sector saw more FDI flowing in this year than in the last decade and a half combined.
Much of the action by the government in banking and financial services in 2015 came via budget announcements. The focus shifted towards priority targets with the government announcing the launch of MUDRA Bank (Micro Units Development and Refinance Agency Bank) with a corpus of Rs 20,000 crore. While the government tasted some success in the form of Jan Dhan Yojana, with more than 19 crore bank accounts added till date, it had to announce a Rs 70,000-crore package along with Mission Indradhanush to help debt-ridden public sector banks.
Another big picture story for the government was the establishment of the National Infrastructure Investment Fund (NIIF) with a corpus of Rs 40,000-crore to kickstart investment in the real estate sector.
Insurance gets a boost
According to data from VCCEdge, the data research platform arm of VCCircle, insurance companies were able to attract more funds in the last one year than they could in the last 15, with the hike in FDI limit from 26 per cent to 49 per cent. Since then, 14 deals have been announced with a total disclosed value of $2.2 billion.
British insurers Bupa Plc and Aviva Plc, Japan’s Nippon Life Insurance Co. and Tokyo Marine Holdings Inc, French firm Axa Group and Australia’s QBE Insurance Group Ltd and Insurance Australia Group Ltd were among the companies that have raised or are planning to raise their stake in their joint ventures with Indian insurance companies.
Foreign AMCs take a bow
The year saw several foreign investors led by big names such as Goldman Sachs, Nomura Asset Management Co. Ltd. and Deutsche Asset Management selling their stakes in AMCs. Meanwhile, Religare Global Asset Management s sold its entire stake to Invesco in November while Nippon Life Insurance Co. hiked its stake in Reliance Mutual Fund to 49 per cent.
I-banking takes the cake, brokerages take the pie
It was a good year for investment bankers making money on IPO deals. The Indian primary market ended the year with the best performance in five years as companies raised Rs 13,000 crore from the market.
The deal season was fruitful for brokerages as well. Deals like Fairfax Financial Holdings buying 26 per cent stake in IIFL Holdings Ltd and BNP Paribas SA buying shares in brokerage firm Sharekhan Ltd, were highlights of the year. Baring PE India also sold its entire stake in brokerage firm Inditrade Capital Ltd to Sudip Bandyopadhyay, and two other companies—Juno Moneta Technologies and AT Invofin India, but at a loss.
RBI: New banks, new norms
Bandhan Financial Services Pvt Ltd became the first new private bank to start operations this year, even as RBI gave its in-principle nod to 11 entities to start payments banks. Paytm was the only mobile wallet company to figure in the list.
Resurrection of microfinance
Small finance bank licences were next as RBI gave in-principle nod to 10 NBFCs (non banking finance companies), eight of which were micro finance institutions (MFIs). While a few big names such as Arohan Financial Services Pvt Ltd missed the opportunity, Samit Ghosh-run Ujjivan Financial Services Pvt. Ltd was lucky enough to secure one. Arohan, Ujjivan and Janalakshmi Financial Services Pvt Ltd were among those MFIs which attracted the attention of PE/VCs as this segment looked to raise funds via private placements and NCDs.
It was not just new banks, there were a string of leadership changes in the banking sector. Standard Chartered Plc last month hired Zarine Daruwala from ICICI Bank Ltd as its India CEO. Deutsche also rejigged its top management team, appointing Gunit Chaddha as Asia Pacific CEO, while Naina Lal Kidwai announced she would step down as chairperson of HSBC India at the close of this year.
While 2015 was big from the announcement perspective, 2016 is expected to be big from the implementation angle. With the payments banks and small finance banks licensees getting a timeline of 18 months to enter the market, several of them will be starting operations in 2016.
With the ceiling on foreign stake in banks raised, established players may see more action even as MFIs try to reduce their foreign ownership to comply with the RBI norm of 49 per cent. Asset reconstruction companies may also make a comeback given the new RBI norms, thus helping revive the non-performing assets (NPA) market.