Ajay ji
This growth has not only reshaped the sector’s structure but also elevated its prominence in equity markets. BFSI now comprises 38% of the Nifty-50 Index, up from 15% in 2004. While banks continue to form the sector’s backbone, their share in total BFSI market cap has declined from 85% to 57%, making room for NBFCs, insurance, capital markets, and fintech players.
Private banks have nearly doubled their credit market share to 43% in FY25, up from 21% in FY14, fuelled by retail lending, tech-driven distribution, and superior asset quality. PSU banks, after losing 20% share between FY11–21, have limited further losses to 400 basis points due to improved capitalization and profitability.
Retail credit penetration has grown significantly, with retail credit to GDP rising from 9% in FY14 to 18% in FY25, driven by fintech adoption, better underwriting models, and increased disposable incomes. Meanwhile, deposit accounts per capita tripled in 15 years, propelled by Jan Dhan Yojana and digital push.
Digital payments, led by UPI, have redefined transaction habits—UPI now constitutes 93% of digital transactions, up from 68% in FY21, with its value reaching 71% of GDP. FinTechs have become integral, contributing 10% of the incremental BFSI market cap over FY20–25, while the combined valuation of key unlisted BFSI firms stands at ~INR 10 trillion.
Asset quality has seen a sharp turnaround—GNPA reduced to 2.5% in FY25E from 11.2% in FY18, and NNPA to 0.6%. As India’s financialization deepens, BFSI remains a compelling long-term investment theme, powered by technology, inclusion, and evolving consumer needs.
ICICI Bank: Buy| Target Rs 1600| LTP Rs 1404| Upside 14%
ICICI Bank reported a healthy Q4 performance with PAT ₹126b (5% beat, 18% YoY growth), driven by robust NIM expansion, healthy other income, controlled provisions and contained operating expenses. ICICI Bank posted 11% YoY NII growth with NIM rising by 16bp QoQ to 4.41%. Net advances grew 13% YoY, while deposits rose 14% YoY.
Secured asset quality remained stable (excl. agri) with no signs of stress, leading to an improvement in the GNPA ratio.
We upgraded our earnings estimates by 2.5%/4.2% for FY26/FY27 on the back of positive NIM surprise and controlled credit cost. We thus estimate RoA/RoE of 2.3%/17.5% in FY27. ICICI remains our top preference in the sector.
Shriram Finance: Buy| Target Rs 775| LTP Rs 655| Upside 18%
SHFL is well-positioned to capitalize on the recovery in vehicle finance, particularly as demand for commercial and passenger vehicles gains momentum.
With a diversified lending portfolio, the company is set to benefit from lower borrowing costs, which will enhance net interest margins and profitability. Diversified product suite helped it mitigate the CV business cyclicality.
Its strong focus on asset quality & collection efficiency suggests that it is well-prepared to navigate the evolving credit environment. We expect 18%/19% AUM/PAT CAGR over FY24-27.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
