India’s banking, financial services and insurance (BFSI) sector has expanded its market capitalization more than 50 times in last two decades from Rs 1.8 lakh crore in 2005 to Rs 91 lakh crore in 2025, a report by Bajaj Finserv Asset Management has said.
The two-decade long expansion, translating into a compound annual growth rate (CAGR) of around 22 percent, reflects deepening financialization, regulatory reforms and rising household participation in investing in financial assets. The study said India’s BFSI sector’s market capitalisation as a percentage of GDP has climbed from 6 percent in 2005 to 27 percent in 2025, underlining its growing heft in the economy.
The composition of the sector has also seen a dramatic shift. Banks, which accounted for 85 percent of the BFSI market capitalisation in 2005, now make up 57 percent, with non-bank finance companies (NBFCs), insurers, fintechs and asset management companies emerging as value creators.
Over the past decade, bank credit has grown at a CAGR of 10.7 percent while deposits have expanded by 10.25 percent annually, supported by improved asset quality - with gross NPAs falling from 5.8 percent in FY22 to 2.2 percent in FY25.
NBFCs have strengthened their foothold in India’s BFSI space, accounting for 18 percent of the total BFSI earnings in FY24. Their networth has grown at ~15 percent CAGR over two decades, while net profit rose at ~31.7 percent CAGR, with gross NPAs declining from 4.5 percent in FY22 to 2.6 percent in FY25.
The insurance industry’s market capitalization has surged to Rs 10.6 lakh crore, with life insurers’ AUM growing nearly 10x since FY07 to Rs 61.6 lakh crore, while the general insurance business has grown at a similar pace over 15 years.
India’s mutual fund industry has seen its AUM soar 45 times over the past two decades to cross Rs 75 lakh crore, with the AUM-to-GDP ratio at a record 19.9 percent. The rapid rise of retail participation through digital platforms and systematic investment plans has reinforced the sector’s role as a long-term wealth creator.
The study also noted that the Nifty Financial Services Index has consistently outperformed the Nifty 50 through multiple market cycles - including post-2009, 2014, and the 2021 post-COVID rebound - underscoring BFSI’s strength as a structural driver of Indian equities.
With policy reforms, expanding financial inclusion and formalization of household savings, Bajaj Finserv AMC said the sector now stands as both a driver and beneficiary of India’s growth trajectory, and remains central to the aspiration of becoming a $30 trillion economy.
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