Trend of disintermediation The emergence of the global economy has led to the free flow of capital across geographical boundaries. The financial sector is increasingly witnessing the trend of disintermediation i.e. reduction in the number of intervening layers to reach the end users of these funds. An instance is that of large Indian corporates increasingly accessing financing directly from foreign markets instead of relying on domestic or foreign banks as was done earlier.   Increasing competition and reducing spreads The liberalization of the financial sector has led to increasing competition among the financing entities thereby reducing their margins (interest spreads). This has led to a renewed effort at reducing the cost of funding as well as the cost of operations.   Emergence of The Universal Bank with access to low cost funding The liberalization of the financial sector has also led to the distinctions between banks and Financial Institution rapidly blurring with each venturing in the area hitherto set aside for the other. In the era of intense cost competition, access to low cost retail funds has become a crucial requirement for survival and growth in these circumstances. Worldwide, it is expected that these various entities through a process of corporate activity transform themselves in Universal Banks with access to low cost retail funding.   Enhanced use of technology to increase reach and reduce cost In order to enhance the efficacy of operations while at the same time reduce operating costs, banks are increasingly seeking recourse to use of technology through automation of processes, and reaching out to existing and potential customers through telecommunication networks or through the internet. Indeed the internet is proving to be the latest arena for the banks and financial institutions in their quest for viable financing opportunities for growth. Institutions and trends in the Financial Sector We would look forward to receiving your feedback and suggestions on this module at services@indiamarkets.com

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