The origins of India’s financial services sector go back before Independence, but the origins of reforms and changes that have shaped it into what it is today coincide with our economic journey from 1991. When India gained independence, disorder ruled in almost every segment. In life insurance, for instance, there were around 200 insurers and little accountability. Defaults and disappearances were common. In 1956, to regulate insurers and protect individuals, the government in line with its socialist ideology took over the operations of the 245 life insurers and set up Life Insurance Corporation (LIC). Similarly, general insurance was nationalised in 1972, when 107 insurers were merged to form General Insurance Company (GIC) and its four subsidiaries.

Along with bank deposits, life insurance policies — which provided both insurance and investment products — were the top investment choices for households. Not stocks, as private enterprise was stifled, and there weren’t too many listed companies. Not mutual funds (MFs) which debuted only in 1964 with Unit Trust of India (UTI) and US-64, a monopoly that stayed till 1987.

Gradually, stocks caught the imagination of the public, and once again it was the government flexing its control fingers. In the early 1970s, the government, under the now-defunct Foreign Exchange Regulation Act (Fera ), made it mandatory for multinational companies (MNCs) operating in the country to sell 40 per cent of their equity to the public. Many investors, who sought and held on to those shares into the 1990s, created tremendous wealth as several of these companies were leaders in their respective fields and issued dividends, bonuses and rights issues liberally.

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