India’s banking, financial services, and insurance (BFSI) sector has witnessed remarkable expansion over the past two decades, with its market capitalisation soaring 50 times—from ₹1.8 lakh crore (US$ 20.28 billion) in 2005 to ₹91 lakh crore (US$ 1 trillion) in 2025—according to a study by Bajaj Finserv Asset Management Company (AMC).
This transformation underscores the sector’s pivotal role in shaping India’s economic growth and transition toward a more financialized and capital-driven economy.
Key Growth Drivers and Trends
The BFSI sector now contributes 27% to India’s GDP, up from just 6% two decades ago, growing at a compound annual rate of 22%. The expansion has been supported by:
- Strong credit growth across retail and corporate segments.
- Improved bank balance sheets and declining non-performing assets (NPAs).
- Rising financialization of household savings.
Banks continue to lead the sector, holding 57% of the total BFSI market capitalisation, though their dominance has eased from 85% in 2005 as NBFCs, fintechs, insurers, and asset management companies gain greater significance.
Strengthening Financial Fundamentals
The sector’s fundamentals have improved considerably:
- Gross NPAs have declined from 5.8% in FY22 to 2.2% in FY25.
- Credit costs have reduced from 1.3% to 0.4% over the same period.
NBFCs have emerged as a key growth driver, expanding their net worth at 15% CAGR and profit after tax at 31.7% CAGR, now contributing around 18% of total BFSI earnings.
Financialization and Market Performance
India’s insurance and mutual fund industries have played a major role in deepening financial inclusion:
- Life insurance AUM has grown to ₹61.6 lakh crore (US$ 693 billion).
- Mutual fund AUM has surged to ₹75 lakh crore (US$ 844 billion), a 45-fold increase in 20 years.
The report highlights that BFSI stocks have consistently outperformed the broader market, with the Nifty Financial Services Index surpassing the Nifty 50 during major recovery phases such as the 2009 post-crisis rebound, the 2014 election rally, and the 2021 post-pandemic uptrend.
Structural Role in India’s Growth
According to Bajaj Finserv AMC, the BFSI industry remains India’s “long-term alpha engine”, driving its evolution from a cash-based to a capital-based economy. The sector continues to be a cornerstone of the country’s economic transformation, supporting credit expansion, investment flows, and the broader vision of “Viksit Bharat.”
Summary:
India’s BFSI sector has grown 50 times in market capitalisation over 20 years to reach US$ 1 trillion, driven by robust credit growth, falling NPAs, and increasing financialization. With banks, NBFCs, insurers, and AMCs all contributing to this expansion, the sector now accounts for 27% of India’s GDP and remains central to the nation’s journey toward becoming a developed, capital-driven economy.
Disclaimer:
This article is intended solely for educational and informational purposes. The securities or companies mentioned are provided as examples and should not be considered as recommendations. Nothing contained herein constitutes personal financial advice or investment recommendations. Readers are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
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