Financial Institutions in India

The Financial Institutions in India mainly comprises of the Central Bank which is better
known as the Reserve Bank of India, the commercial banks, the credit rating agencies, the
securities and exchange board of India, insurance companies and the specialized financial
institutions in India.

Reserve Bank of India:

The Reserve Bank of India was established in the year 1935 with a view to organize the financial
frame work and facilitate fiscal stability in India. The bank acts as the regulatory authority with
regard to the functioning of the various commercial bank and the other financial institutions in
India. The bank formulates different rates and policies for the overall improvement of the
banking sector. It issue currency notes and offers aids to the central and institutions governments.

Commercial Banks in India:

The commercial banks in India are categorized into foreign banks, private banks and the public
sector banks. The commercial banks indulge in varied activities such as acceptance of deposits,
acting as trustees, offering loans for the different purposes and are even allowed to collect taxes
on behalf of the institutions and central government.

Credit Rating Agencies in India:

The credit rating agencies in India were mainly formed to assess the condition of the financial
sector and to find out avenues for more improvement. The credit rating agencies offer various
services as:

• Operation Up gradation
• Training to Employees
• Scrutinize New Projects and find out the weak sections in it
• Rate different sectors

The two most important credit rating agencies in India are:

• CRISIL
• ICRA

Securities and Exchange Board of India:

The securities and exchange board of India, also referred to as SEBI was founded in the year
1992 in order to protect the interests of the investors and to facilitate the functioning of the
market intermediaries. They supervise market conditions, register institutions and indulge in risk
management.
Insurance Companies in India:

The insurance companies offer protection against losses. They deal in life insurance, marine
insurance, vehicle insurance and so on. The insurance companies collect the little saving of the
investors and then reinvest those savings in the market. The insurance companies are
collaborating with different foreign insurance companies after the liberalization process. This
step has been incorporated to expand the Indian Insurance market and make it competitive.

Specialized Financial Institutions in India:

The specialized financial institutions in India are government undertakings that were set up to
provide assistance to the different sectors and thereby cause overall development of the Indian
economy. The significant institutions falling under this category includes:

• Board for Industrial & Financial Reconstruction

• Export-Import Bank Of India
• Small Industries Development Bank of India
• National Housing Bank

ICICI Prudential Life Insurance

eyes rural market
ochi: Leading private insurance company, ICICI Prudential Life Insurance has identified India’s
rural areas as the next big opportunity and proposes to further stregthen its presence in the
villages, a top ICICI official said today.

Poonam Bhardwaj, Senior Vice President, Customer Service and Operations, ICICI Prudential
Life Insurance, told a press meet here that about 45% of Indian household incomes come from
rural areas and 50% of rural income comes from the non farm sector.

To tap the rural market, the company has developed a multi channel distribution network to
increase touch points. It has established 260 micro offices in tehsils and districts across key
states, appointed over 20,000 advisors dedicated to the rural segment and has tied up with
leading Regional Rural Banks, Micro Finance Institutions (MFI)s and NGOs.

The company has also created a strong service infrastructure to ensure that the rural customer
enjoys the highest level of service experience.

Poonam Bhardwaj said there are huge opportunties in the life insurance sector as only a third of
the target propulation of 400 million had been covered and added that the company, the ‘largest
private life insurer in the rural segment,´ had crossed the one million policies milestone.
The Rural Business Channel (RBC) launched in February last year has garnered over Rs100
crore business so far, she said. Business in the urban areas from April-november has touched
Rs3,947 crore, she said.

ICICI MF launches small investment plan for

rural market
ICICI Prudential Mutual Fund on 25 April launched ‘micro systematic investment plan’ (MSIP)
in association with KAS Foundation, a micro-finance institution, to offer a mutual fund
investment plan which allows a rural investor to take exposure to the booming stock market for
as little as Rs50 every month.

KAS Foundation is one among the 200 non-governmental organizations (NGOs) through which
ICICI Bank has pioneered micro lending and borrowing in rural India.

UTI was the first mutual fund to offer micro-investment option in mutual funds to the rural
population. It follows the same structure of an aggregator who interface between the mutual fund
and the small rural investors. It has about one lakh rural investors signed up for its pension plan
through local organizations. UTI expects to add 10 lakh micro investors into its rank this year
and plans to add more grass-roots organizations into its network.

KAS Foundation, which started four years ago, now has a rural base of 5.25 lakh customers
availing of micro credit from ICICI Bank, primarily in Orissa and Maharashtra. These customers
were split among 12,000 self-help groups spread over 24 districts in August 2005. The
foundation has plans to expand its outreach to at least 20,000 self-help groups by 2007.

KAS foundation will now sell growth-oriented mutual funds schemes to these customers. It will
be an aggregator on behalf of its rural customers and a single interface with the mutual fund.
KSA, which interacts with its customers on a daily basis for servicing their loans and other
financial products, can now sell mutual fund units too without any additional cost. It would have
been financially unviable for the ICICI Mutual Fund to reach out and service such small
investors otherwise.

“This model makes it economically viable for us to reach out to the rural customers through KSA
and service investments as small as Rs50,” said Pankaj Razdan, managing director, ICICI
Prudential AMC. The mutual fund will replicate this model with the network of 199 NGOs that
ICICI Bank had built over the last four years. ICICI Bank had built micro-finance business worth
Rs2,200 crore as on 31 March, 2006.

Nachiket Mor, deputy managing director of ICICI Bank, declined to reveal how much its micro-
finance business has grown this year due to regulatory constraint. “What I can say is that we
have a market of 500 million people and we have only just started at the tip,” he said. ICICI
Bank has a total micro-finance customer base of 3.2 million, serviced through the network of 200
NGOs. ICICI Bank’s insurance subsidiaries—ICICI Prudential Insurance and ICICI Lombard —
offer micro-insurance policies, especially life and health insurance, to its micro-finance customer
base. With the micro systematic investment plan, ICICI Bank’s micro-finance aggregators now
has a full suite of financial products tailored for the rural customers.

After the cities, insurance companies are moving to the countryside. CNBC-TV18 reports that
their sights are set on the Rs 1000 crore untapped rural market.

It all began with IRDA directing insurance companies to get 18% of their policies from rural
India. Tata AIG with its micro insurance initiative, is offering three life cover policies.
Targetting the very poor, premiums cost just Rs 120 per year, with insurance cover of Rs 5,000-
30,000. Bajaj Allianz and Birla Sun Life are expected to tap the market as well.

CNBC-TV18 learns public sector giant LIC is in talks with four general insurance PSUs to offer
composite policies as well. Companies say that the rural market, which is estimated to be about
Rs 1000 crores, includes 75% of Indian households.

"We have got good opportunity here both in terms of doing good to people and business
opportunity. I think it is time that collaborate more with competition than looking at them as
a threat," said Vijay S Athreye, Asst VP - Rural & Social, TATA AIG Life.

The regulator has given a go-ahead to companies to tie up with NGOs, self help groups and
micro finance institutions to market their products. However, at present companies are just
offering protection and term covers, with savings based products to follow soon.

TATA AIG Life Ayushman Yojana | Key

Features

A non participating single premium plan, Tata AIG Life Ayushman Yojana is ideal for rural
populations who have seasonal income. With payment of a single premium at the beginning of
policy term, a person will be insured for 10 years. Besides being insured, the policyholder, upon
maturity of the policy receives 125% of the single premium paid.

Key Features

• Convenience of single premium payment

• Policy Term of 10 years
• Death Benefit paid to the nominee in case of ill-timed death of life insured
• Option to choose Life Cover from a minimum of Rs.5,000 to a maximum of Rs.50,000
• On maturity, get 125% of the single premium paid
• Preamble on ICICI Pru Rural Business Initiative
•
• ICICI Prudential’s rural business initiative has played a very important role in reaching
the underserved segment through its rural insurance plans. ICICI Prudential has covered
more than 2.5 million lives across as many as 16 states in India.

Both our rural plans Sarva Jana Suraksha and Anmol Nivesh are tailored to meet the
unique requirements of rural investors. The plans offer Life cover, low and affordable
premiums and hassle free procedure.