The financial sector is in a process of rapid transformation. Reforms are continuing as part of the overall structural reforms aimed at improving the productivity and efficiency of the economy. The role of an integrated financial infrastructure is to stimulate and sustain economic growth. The growth rate of the financial sector is 15 percent.

The financial sector consists of Institutions, markets, financial instruments, specialized and non-specialized financial institutions of organized and unorganized financial markets, financial instruments and services. The common thing between all is that they facilitate transfer of funds. These parts are not always mutually exclusive; Inter-relationships between these are a part of the system e.g.. Financial Institutions operate in financial markets and are, therefore, a part of such markets.

Indian Financial sector, with Ministry of Finance at the helm as policy making body, with two regulators RBI and SEBI consists of three principal segments i.e.

• Financial Institutions
• Banking Segment
• Markets: Debt/Equity/Securities

• Insurance: A contract in which one party agrees to pay for another party’s financial loss resulting from a specified event (for example, a collision, theft, or storm damage). Lease agreements generally require that you maintain vehicle collision and comprehensive insurance as well as liability insurance for bodily injury and property damage.
• Mutual Fund: A mutual fund enables investors to pool their money and place it under professional investment management. The portfolio manager trades the fund’s underlying securities, realizing a gain or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. There are more mutual funds than there are individual stocks.
• Banking: Financial intermediary Institutions for receiving, lending, and safeguarding money as well as conduction other financial transactions. There are several types of banks: central banks, commercial banks, corporate banks, credit unions, savings banks, trust companies, finance companies, life insurers, investment banks, etc. Banks have drastically evolved throughout time, increasing their services but also becoming institutions that cater to greater numbers of people.
• Shares and Stocks: Shares are a term referred to the units of ownership interest provided to the stockholder or owner of a company. The term is often used in connection with the number of units issued to an owner of Common Stock or Preferred Stock. A stock is a certificate of ownership in a corporation. It is the same as a share

Information technology, deregulation and liberalization have dramatically affected the financial services industry, contributing to two trends: consolidation and increased competition at both national and international levels.

Consolidation means that financial services worldwide are increasingly concentrated in the hands of a few corporations. Consolidation is seen as the single most important factor transforming the financial services industry since almost a decade. Many experts predict that consolidation will continue and within 5 to 10 years there will be only five to ten top financial conglomerates in the world.

In the search for more profitable opportunities, most consolidated financial firms grew through mergers and acquisitions or takeovers that were either friendly or hostile. Such process took place at national and international levels with cross-border consolidation, by trading and investing in financial services in many countries around the world. Many financial services categories, such as retail banking and insurance, were increasingly being brought under one corporate roof, which is called “cross-category consolidation”.

The strategies behind consolidation are:

• Increasing the number of customers and beating competitors by selling various
• Financial products through one distribution channel.
• Diversifying products and customers to avoid the risk and to finance a loss-making part of the business with the profits of another one.
• Maintaining a large capital base as a sponge to absorb losses and the growing cost of technology.
• Increasing the quality of service and products to gain the trust of the customers.
• Increasing profitability in the battle against competitors

Consolidation is the financial industry’s way of dealing with increasing competition. Governments, regulators and supervisors worldwide try to create and maintain a free market with many competitors, for the sake of efficiency and lower prices. Competition remains fierce. The struggle is always for quicker and short-term profit which leads to strategies for more efficiency, lowering costs, expansion of profit-making clients and markets while outpacing competitors. This often means an increasing effort to standardize and automate services, to differentiate them according to the wealth of the client and to shift the focus on financial portfolios. One should also notice the importance of cross selling and cross branding (some financial companies have started to distribute products for their competitors without operating them).