Financials sector largest wealth creator during 2007-12: study

India wealth creator

Restrictions on new banking licences over the past few years have resulted in the financials sector emerging as the largest wealth creator for the second time in a row, according to a study.

"The financials sector (banks, non-banking finance companies and other financial services providers) has gained hugely from restrictions on new banking licences," the study by Motilal Oswal Financial Services Ltd (MOFSL) has said.

Financials has emerged as the largest wealth-creating sector for the first time, hitherto a stronghold of commodity segments, mainly oil & gas, metals and minerals, Motilal Oswal Managing Director Raamdeo Agrawal told reporters here today.

"Due to the restriction on new banking licences, which we term as economic moat, even relatively inefficient banks significantly grew in terms of profits and market cap. When new set of private banks first entered in 1980s, significant portion of value migrated from public sector banks to them."

He said that though fresh banking licences are expected to be issued in near future, the change in competitive landscape would further separate those with strong strategy from those without strategy.

The report, however, pointed out that even after a huge run-up in stock prices, the sector valuations remain lower than average on concerns regarding asset quality and impact of fresh competition by way of new banking licences.

The share of wealth created by the financials sector increased from 13 per cent in 2007 to 22 per cent in 2012, Motilal Oswal's 17th Annual Wealth Creation Study said.

As per the study, private sector Kotak Mahindra Bank retained its place as the most consistent wealth creator.

Consumer and retail emerged as the second largest contributor to wealth creation, Agrawal said, adding, "Various reforms like FDI in multi-brand retail will further fuel the growth of this sector."

Diversified conglomerate ITC emerged as the biggest wealth creator for the first time ever, significantly improving on its seventh rank in the last year's study.

... contd.

Please read our terms of use before posting comments
TERMS OF USE: The views expressed in comments published on indianexpress.com are those of the comment writer's alone. They do not represent the views or opinions of The Indian Express Group or its staff. Comments are automatically posted live; however, indianexpress.com reserves the right to take it down at any time. We also reserve the right not to publish comments that are abusive, obscene, inflammatory, derogatory or defamatory.