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What Is an Investment Fund Meaning & Types
In summary
The financial services sector covers the organisations and activities that help individuals, businesses, and institutions manage money, access credit, invest, make payments, and manage financial risks.
- Banks provide deposits, loans, payment services, and other banking facilities.
- NBFCs provide lending and other financial services without operating as banks.
- Insurance providers help individuals and businesses manage specific financial risks.
- Investment and brokerage firms provide access to securities and investment products.
- Fintech companies use technology to deliver or improve financial services.
- The sector connects savers, borrowers, investors, businesses, and financial institutions.
- The Bajaj Broking website provides access to 4,000+ mutual fund schemes.
- KYC is mandatory for mutual fund investments under applicable SEBI requirements.
The sector is broader than banking. Understanding its different components helps investors interpret how financial institutions operate and how financial products reach consumers.
What is the financial services sector?
The financial services sector refers to the part of the economy involved in providing services related to money and financial activities. It includes organisations that help people and businesses save, borrow, invest, make payments, obtain insurance, and manage financial risks.
Banking is one component, but the sector also includes NBFCs, insurers, asset managers, brokers, payment providers, and fintech companies.
For an investor, the sector can be viewed as an ecosystem connecting capital with those who need or manage it. For example, banks and NBFCs provide credit, while investment firms help channel savings into financial markets.
The sector is therefore wider than the banking industry and contains several distinct business models.
What are the main types of financial services?
The sector includes several categories, each serving a different financial requirement.
Banking services
Banks accept deposits, provide loans, facilitate payments, and offer services such as current accounts and savings accounts. Their business model generally involves managing deposits and extending credit while meeting regulatory and liquidity requirements.
NBFC services
Non-banking financial companies, or NBFCs, provide services such as lending and financing but operate under a regulatory framework distinct from that applicable to banks.
Their activities can include consumer finance, vehicle finance, housing finance, and financing for businesses.
Insurance services
Insurance companies provide financial protection against specified risks. Customers pay premiums in exchange for coverage under the terms of an insurance policy.
Life, health, motor, and general insurance are examples of insurance services.
Investment and asset management
Investment services help individuals and institutions participate in financial markets. These can include mutual funds, portfolio management, brokerage, wealth management, and other investment-related services.
For example, the Bajaj Broking website provides access to 4,000+ mutual fund schemes across equity, debt, hybrid, ELSS, thematic, and NFO categories. Investors can use SIP and lumpsum modes for applicable schemes, subject to the relevant scheme terms.
Before investing in mutual funds, investors must complete applicable KYC requirements. SEBI requires KYC compliance for mutual fund investments.
Mutual fund investors should also consider the SEBI Riskometer, which communicates the risk level of a scheme. The risk level should be considered alongside factors such as the portfolio, investment objective, and investor's own risk tolerance.
Payment services
Payment services enable individuals and businesses to transfer money and settle transactions. They include digital payments, money transfers, payment systems, and other transaction-related services.
Fintech services
Fintech refers to the use of technology to provide or improve financial services. Digital payments, online investment platforms, automated financial processes, and technology-enabled lending are examples.
Fintech can make financial services more accessible and convenient, although users should still consider security, privacy, costs, and regulatory safeguards.
Why is the financial services sector important?
The sector performs several functions that support individuals, businesses, and the wider economy.
Mobilising savings
Financial institutions provide channels through which individuals and businesses can save or invest surplus funds. These funds can then be used elsewhere in the financial system.
Providing credit
Banks, NBFCs, and other lenders provide credit for personal requirements, business activities, housing, vehicles, and other purposes. Credit allows borrowers to access funds before they have accumulated the entire amount themselves.
Supporting investment
Investment and asset management services give investors access to products such as mutual funds and market-linked investments. Investors can use tools such as the SIP calculator, mutual fund calculator, and lumpsum calculator from Bajaj Finance to understand how different assumptions affect investment estimates.
These calculators provide estimates rather than guaranteed investment outcomes.
Managing financial risks
Insurance and other risk-management services help individuals and businesses manage the financial consequences of specified risks. Financial institutions also use risk-management frameworks to assess credit, market, liquidity, operational, and other risks.
Facilitating payments
Payment infrastructure allows money to move between individuals, businesses, financial institutions, and other participants. Efficient payment systems support everyday transactions as well as commercial activity.
How is financial services different from banking?
Banking is a subset of financial services. The broader sector includes several activities that are not performed exclusively by banks.
| Area | Primary focus |
|---|---|
| Banking | Deposits, accounts, loans, and payments |
| NBFCs | Lending and other financial services |
| Insurance | Protection against specified risks |
| Investment services | Investing, brokerage, and asset management |
| Payments | Transfers and transaction processing |
| Fintech | Technology-enabled financial services |
Last updated: September 2026
This distinction matters when assessing companies or industries. A bank, insurer, NBFC, asset manager, and fintech company may all belong to the financial services sector but generate revenue differently and face different risks.
For example, an investor researching financial-sector businesses may also encounter concepts such as Non-Performing Assets, which can affect lenders, or audit, which relates to the examination of financial records and controls.
What should investors consider about the sector?
Investing in financial services companies requires more than looking at revenue or share-price movements. The relevant factors depend on the type of financial institution.
Consider the following:
- Credit quality: Lenders may face losses when borrowers fail to repay their obligations.
- Interest rates: Changes in borrowing and lending rates can affect margins, demand for credit, and investment valuations.
- Regulation: Financial institutions operate within detailed regulatory frameworks, and regulatory changes can affect business models and costs.
- Liquidity: Institutions need sufficient liquidity to meet their obligations as they fall due.
- Technology and cybersecurity: Digital financial services increase the importance of technology infrastructure, data protection, and cybersecurity controls.
- Market conditions: Investment businesses can be affected by market volatility, asset prices, and investor activity.
- Financial reporting: Understanding an institution's financial statements, asset quality, capital position, and profitability can provide useful context.
A financial event can also act as a catalyst for changes in market prices, business activity, or investor expectations.
Investors considering financial products should distinguish between the characteristics of the underlying financial service and the risks of the investment used to gain exposure to it.
For example, an investment in a financial-sector company is different from using a bank deposit, purchasing insurance, or investing in a mutual fund that holds financial-sector stocks.
Conclusion
The financial services sector encompasses banking, lending, insurance, investment management, payments, brokerage, and technology-enabled financial services. Each segment serves a different purpose and carries different operating and financial risks.
For investors, understanding these distinctions provides better context when analysing financial-sector businesses or considering financial products. The right assessment depends on the institution, business model, regulatory environment, financial position, and risks involved.
Last reviewed: September 2026
Mutual funds are subject to market risk. Please read the scheme-related documents carefully before investing.
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Frequently Asked Questions
Sector structure and regulation
Financial services and the economy
What is the role of regulation in financial services?
Regulation establishes requirements for areas such as capital, conduct, disclosures, risk management, customer protection, and market operations. The applicable regulator depends on the financial activity and institution.
How do financial services companies earn revenue?
Revenue models vary. Banks and lenders may earn interest income and fees, insurers earn premiums and investment income, brokers may earn brokerage and other fees, while asset managers generally earn management-related fees.
Why can financial-sector performance affect other industries?
Financial institutions provide credit, payment infrastructure, insurance, and investment services to other businesses. Changes in credit availability, borrowing costs, or financial-market conditions can therefore affect business activity beyond the financial sector.
What is financial inclusion in the financial services sector?
Financial inclusion refers to improving access to appropriate and affordable financial products and services for people and businesses that may otherwise have limited access to the formal financial system.
Disclaimer
Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319
BFL does NOT:
(i) provide investment advisory services in any manner or form.
(ii) carry customized/personalized suitability assessment.
(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.
In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.
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Disclaimer on Risk-O-Meter:
Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.
Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.
Disclaimer
Bajaj Finance Limited ("BFL") is an NBFC offering loans, deposits and third-party wealth management products.
The information BFL contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.
This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.
Disclaimer
Mutual Fund SIP calculator may provide potential investors an approximate estimate on the maturity amount of the monthly SIP, purely based on mathematical calculation of the projected annual return rate selected by investor. However, such calculation does not factor the actual performance by the Asset Management Company (AMC) and should not be treated as any advice or assurance about the actual return of investment. Mutual Funds do not have a fixed rate of return and it is not possible to predict the rate of return. Please note that the SIP calculator are for illustrations only and do not represent actual returns which may vary depending on various factors including but not limited to actual performance, expense ratio, taxation, exit load (if any), etc.