Metamorphosis of Marketing Financial Services in India

By V, Krishna Chaitanya | Journal of Services Research, April-September 2005 | Go to article overview
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Metamorphosis of Marketing Financial Services in India

V, Krishna Chaitanya, Journal of Services Research

The Financial Service industry in India has grown tremendously particularly after eighties. Number of new services and products like credit cards, ATMs, consumer finance, mutual funds, dematerialization, factoring, securitization, credit rating, leasing, investment banking, forfeiting, have become a norm since then. The driving forces behind this development are liberalization, economic reforms and deregulations, economic changes and rapid developments in capital markets. All these factors provided a greater freedom to private sector to become more competitive, productive, effective and efficient. The customers have become more demanding and prefer innovative products and quality services at faster speed from the companies. This has made the job of financial service company much tougher and challenging, as they need to understand the customers changing needs, offer new products and services and most importantly they have to promote these.

Therefore in the present day context it has become even more important to learn the application of marketing theories of product, providing service quality, distribution and planning for a customer oriented marketing strategy.

The paper discusses about

i. Understanding the meaning, nature and scope of financial services activities in India.

ii. Studying the features of financial services and financial products

iii. To frame a marketing strategy on how to attain service quality and focus on effective distribution.

iv. To study the key drivers of change in financial service industry.


The Indian financial services industry has undergone a metamorphosis since 1990. During the late seventies and early eighties, The Indian financial services industry was dominated by commercial banks and financial institutions which focused on catering to the needs of Indian industries. The late eighties and early nineties saw the mushrooming of financial companies offering a wide range of financial services. The economic liberalization has brought complete transformation in the Indian financial service industry.


In general, all types of activities which are of a financial nature could be brought under the term 'financial services'. The term 'Financial Services' in a broad sense means 'mobilizing and allocating savings'. Thus, it includes all activities involved in the transformation of saving into investment.

Avadhani, (1998) opines that the 'financial service' can also be called 'Financial intermediation'. Financial intermediation is a process by which funds are mobilized from a large number of savers and make them available to all those who are in need of it and particularly to corporate customers. Thus, financial services sector is a key area and it is very vital for industrial development. A well-developed financial services industry is absolutely necessary to mobilize the savings and to allocate them to various investible channels and thereby to promote industrial development in a country.


Financial services cover a wide range of activities. They can be broadly classified into two namely:

1. Traditional activities

2. Modern activities

Traditional activities are further classified into two, namely:

i. Fund based

ii. Non-fund based

Figure 1 below narrates the classification of Financial Services.

1. Traditional activities: are the services encompassing both capital market and money market activities and can be grouped under Fund based & non-fund based activities.

i. Fund based activities:

a) Underwriting of shares, debentures, new issues.

b) Dealing in secondary market activities

c) Involving in money market instruments

d) Lease equipments, hire purchases, venture capital, factoring and forfeiting etc.

e) Participating in foreign exchange market activities.

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