India's BFSI sector grows 50-fold in 20 years, market cap hits ₹91 trillion

India’s banking, financial services, and insurance (BFSI) sector has multiplied its market capitalization 50 times in the last two decades. According to a new study by Bajaj Finserv Asset Management Company (AMC), the sector’s market cap surged from ₹1.8 trillion in 2005 to ₹91 trillion in 2025, growing at a compound annual rate of 22%.

 

The BFSI sector now accounts for 27% of India’s GDP, up from just 6% two decades ago.

 

“BFSI is not merely a sectoral story — it’s a structural megatrend driving India’s transition to a Viksit Bharat,” the study said.

 

 Banks Still Dominate, But New Players Are Catching Up

 

 

As of 2025, banks comprise 57% of the BFSI market cap, compared to 85% in 2005, signaling the rise of NBFCs, fintechs, AMCs, and insurers as major value creators.

 

Over the last decade, bank credit grew at a CAGR of 10.7%, while deposits expanded by 10.25%.

 

Banks’ balance sheets have strengthened sharply — gross NPAs dropped from 5.8% in FY22 to 2.2% in FY25, and credit costs declined from 1.3% to 0.4%.

 

The study also highlights that BFSI stocks have outperformed the broader market consistently — from the post-GFC rebound in 2009 to the post-COVID surge in 2021, the Nifty Financial Services Index (NFS) has beaten the Nifty 50 across every recovery cycle.

 

" Just after the global financial crisis recovery in 2009, NFS surged 80% in just six months compared to Nifty 50’s 64%. Similarly, following the election results in 2014, NFS delivered 37% returns in six months versus 23% for Nifty 50. The post-COVID rebound in 2021 further highlighted this strength, with NFS gaining 66% in one year against Nifty 50’s 55%. Even at the market peak in 2024, NFS managed to edge out broader market returns, rising 21% versus 19%" noted the study. 

Source: ICRA MFI Explorer. Past performance may or may not be sustained in future

 

NBFCs and Fintechs Fuel Credit Expansion

 

The non-banking financial companies (NBFCs) segment has grown into a major credit engine, expanding its net worth at 15% CAGR over the last 20 years and profit after tax (PAT) at 31.7% CAGR.

 

NBFCs now account for 18% of total BFSI earnings, reflecting their rising importance in retail, MSME, and rural credit.

Asset quality has also improved significantly — gross NPAs fell from 4.5% in FY22 to 2.6% in FY25.

 

“NBFCs are playing a critical role in deepening credit access, especially for underserved segments,” the report noted, adding that structural growth drivers such as digital lending, vehicle finance, and co-lending partnerships will sustain momentum.

 

 Insurance and Mutual Funds: India’s Financialization Story

 

• The insurance industry is another standout performer.
• India is projected to become the sixth-largest insurance market in the world by 2032.
• The life insurance AUM has grown 10x to ₹61.6 trillion since FY07, while the general insurance segment has expanded 10x over the last 15 years.
• The insurance sector’s market cap now stands at ₹10.6 trillion, driven by rising household savings and retail participation.

 

Meanwhile, the mutual fund industry has seen an even steeper climb — its AUM has grown 45X over the past two decades.

As of March 2025, mutual fund AUM stood at ₹75 trillion, with AUM-to-GDP reaching 19.9%, up from 7% in 2015.

 

The rise of SIPs, digital platforms, and Tier-2 and Tier-3 city investors has expanded financial inclusion and democratized investing.

 

 BFSI: The Market’s Long-Term Alpha Engine

 

• The Bajaj Finserv AMC study emphasizes that BFSI has consistently outperformed other sectors and broader indices over the long term.
• During major market rebounds — such as post-2009, post-2014 elections, and post-COVID 2021 — BFSI stocks outpaced the Nifty 50 by 10–20 percentage points.
• “The sector’s resilience, profitability, and ability to absorb shocks make it a cornerstone of India’s capital markets,” said the study.
• “The 50X rise in BFSI’s market cap over 20 years reflects India’s structural transition from cash to capital, from informal to formal, and from savings to financial assets.”