India's BFSI sector grows over 50 times in two decades, share of banks reduced due to NBFCs: Report

The sector's market capitalization has increased more than 50 times, jumping from Rs 1.8 trillion in 2005 to Rs 91 trillion in 2025. This represents a strong compound annual growth rate (CAGR) of around 22 per cent.

While banks continue to be the backbone of the BFSI sector, their share in the total market capitalization has reduced from 85 per cent in 2005 to about 57 per cent currently.

This shift is mainly due to the rise of new players such as non-banking financial companies (NBFCs) and fintech firms.

The report said "The Indian BFSI sector has experienced a remarkable >50x surge in market capitalization.........While banks remain the backbone, their share in the total BFSI sector market cap has declined to approx. 57 per cent at present from 85 per cent in 2005".

These emerging segments have benefited from rapid technological advancements and innovation, which have helped them gain a significant presence in the market.

The fintech sector, which barely existed before 2015, now holds a combined market capitalization of over Rs 12 trillion, including both listed and unlisted companies. This clearly shows how digital technologies and changing consumer preferences are shaping the future of the financial sector.

The report also highlighted the strong recovery in earnings for the BFSI sector after the COVID-19 pandemic. The sector's share in the Nifty-50 index earnings rose to 33 per cent in FY24, up from 16 per cent in FY10. This growth has been supported by improved asset quality, rising loan demand, and lower provisioning requirements.

However, the sector has seen some earnings moderation recently due to narrowing net interest margins (NIMs) and higher credit costs.

The report added, "Despite these challenges, banks with solid retail franchises and effective risk management strategies are well-positioned for long-term stability".

The financial strength of the sector has also improved. In FY24, the net worth of banks reached Rs 26 trillion, while NBFCs had a net worth of Rs 12.4 trillion. This growth has further boosted investor confidence in the Indian BFSI sector, which continues to offer strong investment opportunities. (ANI)