The Indian BFSI Sector is where all the growth is

 

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The Indian BFSI (Banking, Financial Services and Insurance) sector has seen humongous growth over the last two decades, having grown in GDP from Rs. 1.8 trillion in 2005 to Rs. 91 trillion in 2025- a whopping 50X rise in value.[1]Apart from the burgeoning size of the economy and the accompanying rise in consumption of financial services, the greater inclusion of people living in tier II and tier II cities has also given a fillip to the sector, with aspirational spending leading to a lot of the credit growth. The government, on its part, has gone out of its way to ensure that more and more people join the formal banking system via Aadhar and the e-kyc aided simple account opening process. It has also helped put in place a highly efficient Direct Benefit Transfer (DBT) system to reach funds directly to the beneficiaries in their bank accounts, helping ingrain banking habits in a larger and larger number of people.

The highly successful and transformational digital payments revolution in the shape of UPI or Unified Payment Interface has put India right at the top of the world with regard to real-time payment transactions. Fintech startups have played their part in the growth of the sector on account of their tie-ups with banks, helping the latter make their services vastly more accessible as well as customer-friendly. The BFSI sector has, in fact, been a frontrunner with regard to the use of data analytics and AI to help take its services to the next level. The widespread use of mobile banking is a sterling example of how technology can help improve the reach and efficiency of Indian banks.

Exponential Growth of Credit

The Indian middle classes have taken to credit like never before, allowing banks to achieve double digit growth in terms of credit uptake. This is particularly true for retail loans helping people finance the purchase of houses, vehicles, and even personal expenses. The scope of growth for credit to the private sector is quite good, given that India’s domestic credit to the private sector stood at 55% of the GDP in 2020, which is quite less than the global average of 148% according to World Bank figures. Compared to Chain’s 128% of GDP, South Korea’s 165% and even Vietnam’s 148% India can do much better on this front in the days ahead.[2]

Low Insurance Penetration

As a low insurance penetration nation, the scope of growth for insurance products is immense in India. With a mere 4% penetration in 2023, the sky is the limit when it comes to industry growth. The good news is that the Indian insurance industry already boasts a Gross Written Premium (GWP) in excess of $130 billion and an 11% CAGR (from the fiscal year 2020 to the fiscal year 2023.)[3] IRDAI, the body that oversees the Indian insurance industry, has initiated a number of reforms that have made insurance products much more accessible and easier to understand than they were in the past. The emergence and growth of private players has led to a number of benefits, including a rise in investment and the deployment of technology accompanied by a discernible rise in efficiency. Besides, the more liberal foreign investment policies have made global insurance majors look at the Indian insurance sector with renewed interest.

The Indian FinTech Revolution

The Indian FinTech revolution has made the world sit up and take notice. The smooth roll out of the universal digital payments system UPI has impressed nations from across the first and the third worlds. The Indian FinTech revolution has been fueled by the large scale adoption of innovative digital technologies that help meet the demand for efficient and cheap financial services and products. It is not surprising that the Indian FinTech sector has received $20 billion plus investment in the last five years.[4]

The potential for growth for the Indian FinTech over the next two decades is quite robust, given that less than 50% of the nation’s population has access to digital payments, and the number of people with access to credit is a measly 10%.[5]

BFSI- An Employment Generator Par Excellence

The BFSI sector provides employment to 6.1 million professionals, of which banking provides jobs to 2.4 million workers, NBCF to 2.2 million, insurance half a million, and other financial services 1 millon workers. [6]Going forward, one can expect the Indian BFSI sector to continue to do extremely well in terms of providing employment to the young. It is expected that it will provide employment to some 250,000 people by 2030, with most of the hiring happening in Tier II and Tier III cities. Much of the employment will be generated by wealth and insurance businesses who are looking to hire financial planners, digital underwriters, investment advisors, and claim automation professionals.[7]

Conclusion

The Indian BFSI sector is the sector to watch out for in terms of it sheer potential for growth and ability to generate employment. Driven by widespread digital adoption, a stupendous growth in financial inclusivity, the growth of diverse business and employment opportunities, as well as the fact that the Indian economy is on the ascendant, the Indian BFSI is in a fortuitous and happy space that is likely to remain that way in the foreseeable future.

[1] https://www.livemint.com/companies/news/indias-bfsi-sector-grows-over-50-times-in-two-decades-share-of-banks-reduced-due-to-nbfcs-report-11745462233150.html

[2] https://www.ey.com/en_in/insights/india-at-100/how-india-can-fill-the-credit-gap-to-fuel-economic-growth

[3] https://www.mckinsey.com/in/our-insights/steering-indian-insurance-from-growth-to-value-in-the-upcoming-techade

[4] https://www.pwc.in/assets/pdfs/investing-in-indias-fintech-disruption.pdf

[5] https://economictimes.indiatimes.com/small-biz/sme-sector/fintech-revolution-2-0-is-expected-to-unfold-in-india-in-the-next-10-years-mobikwiks-upasana-taku/articleshow/120891118.cms?from=mdr

[6] https://www.praxisga.com/insights/education-and-employability/unlocking-growth-skilling-opportunities-in-india-s-bfsi-sector

[7] https://economictimes.indiatimes.com/industry/banking/finance/banking/bfsi-sector-to-add-2-5-lakh-jobs-by-2030-hiring-shifts-to-tier-ii-iii-cities-report/articleshow/123426130.cms?from=mdr