Non-performing assets (NPAs) and financial frauds in the Indian banking sector have not deterred private equity and venture capital firms from investing in financial services. The Indian financial services sector, in fact, witnessed $4 billion of investments in the first half of 2018, the highest ever half-yearly investment, following the recent investment by Warren Buffett’s Berkshire Hathaway in Paytm. While public sector banks continue to reel under the burden of high non-performing assets (NPAs), investors have turned to large private sector banks, non-banking financial companies (NBFCs), and alternative banking structures such as small finance banks for deployment of funds, as they continue to eat into the share of state-run banks. Globally, investors have realized that payments is a large space, but may not be a significant profit pool because of free services to consumers. However, the payments data can be monetized for adjacent activities such as lending, wealth management, insurance and broking, where the profit pools are extremely significant. Within financial services, the NBFC sector witnessed maximum activity in terms of deal volumes, led by its ability to customise credit and underwrite small-ticket loans to serve the unbanked and under-banked population.

(Live Mint)