Why South India is a bigger hub for finance: Experts decode

South India’s financial story is changing as savings, investments, banking and entrepreneurship become increasingly connected. Experts at the India Today Conclave – South 2026 said the region already has a strong financial ecosystem, with its economic growth creating new opportunities for banks, financial institutions and investors.

Speaking at the Conclave, C Balagopal, Chairman, Kerala State Industrial Development Corporation and former Chairman of Federal Bank, said the southern states have a diversified economy, with different regions developing their own centres of economic activity.

He said finance generally follows economic growth and the South has several growth centres rather than depending on a single economic engine. He also pointed to the way economic activity and profit pools have shifted across the country since liberalisation, with the southern states gaining from greater economic freedom and reduced centralisation.

FROM SAVING TO INVESTING

A major change in the financial landscape is the shift from traditional savings towards investments.

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said Indian households are increasingly moving away from keeping most of their money in bank deposits and gold towards financial market investments.

The growth in investment accounts reflects this change. More people are now participating in the capital markets through direct stocks, mutual funds and systematic investment plans.

According to Vijayakumar, this financialisation of savings can help channel household money into capital formation and investment. It can also widen participation in wealth creation, which was earlier largely limited to a smaller section of investors.

He also highlighted the importance of remittances for the southern economy. A large share of the money sent to India from abroad flows into the southern states. He said these funds could play a bigger role in the region’s economic growth if they are channelled beyond consumption and towards investment and productive activity.

SOUTH ALREADY HAS A DEEP FINANCIAL NETWORK

Dr K Paul Thomas, MD and CEO of ESAF Small Finance Bank, said the South should not be viewed merely as an emerging financial hub. According to him, the region already has a well-developed banking and financial ecosystem.

The South has a long history of banking, with several public sector banks, old-generation private banks, small finance banks, large NBFCs and cooperative institutions having a strong presence in the region.

Thomas also highlighted the role of financial institutions in reaching low-income and rural households. He said the southern market has a financially aware and disciplined customer base, with people increasingly understanding the importance of credit scores and responsible borrowing.

However, he said banks and financial institutions now need to move beyond being transaction or loan providers. Their role should increasingly include financial education, investment awareness and helping customers participate in financial and capital markets.

GOLD AND REMITTANCES ARE BECOMING PRODUCTIVE CAPITAL

Ashish Chandak, Group Chief Compliance Officer at Manappuram Finance, highlighted the role of organised finance in bringing household assets into the formal economy.

He explained how gold, which was traditionally kept in household lockers, can be used to access formal credit. This gives households an alternative to informal borrowing and allows them to use their assets to fund their needs and ambitions.

Chandak also pointed to a change in the traditional remittance-led model in the South. Earlier, remittances were largely associated with savings and household spending. Increasingly, savings are being converted into capital, which can support entrepreneurship and business activity.

He said the growth of businesses across technology and manufacturing in the southern states reflects the region’s expanding entrepreneurial base.

WEALTH IS SPREADING BEYOND MAJOR CITIES

Dinesh K Nair said wealth is no longer concentrated only in the major metropolitan centres. Financial services and advisory businesses are increasingly reaching smaller cities as well.

He said the South’s educated population and successful businesses have created wealth that is now being passed on to the next generation. This is increasing the need for proper investment, financial planning and succession planning.

Nair also pointed to the growing activity in the capital markets, including new companies accessing public markets, as another sign of the changing financial landscape outside the traditional metropolitan centres.

THE NEXT PHASE IS ABOUT TURNING FINANCE INTO GROWTH

The discussion highlighted how the South’s financial ecosystem is evolving from a model centred on savings, deposits and remittances towards one driven by investment, entrepreneurship and capital formation.

Balagopal said the region has a deep savings pool and a strong economy, making it a natural destination for financial services. Thomas stressed the need for financial institutions to help customers become investors, while Chandak highlighted the role of organised finance in supporting entrepreneurship.

The larger shift is clear: money is increasingly moving from households into formal finance, investments and businesses. For the southern states, the challenge now is to ensure that this financial strength translates into wider economic activity and long-term growth.

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