Indian Banking Sector: Comprehensive Industry Analysis Report | Scrolls
- Editor
- Sep 28
- 2 min read
by KarNivesh | 28 September, 2025
Overview of the Indian Banking Sector
The Indian banking sector has emerged as one of the strongest and most dynamic financial ecosystems globally, driven by digital transformation, improved asset quality, and robust growth fundamentals. In 2025, the sector is marked by resilience amid global economic uncertainties and regulatory shifts. Gross non-performing assets (NPAs) have declined to a 12-year low of 2.8%, while government-backed financial inclusion initiatives continue to strengthen outreach, particularly in rural India.
Industry Landscape
The Indian banking industry covers a vast network of public sector banks (PSBs), private sector banks, regional rural banks, cooperative institutions, and specialized financial bodies. Collectively, banks manage deposits exceeding ₹231.7 trillion and credit worth ₹182.8 trillion. The sector underpins India’s financial system, facilitating credit intermediation, payments, and priority-sector lending. A remarkable transformation has occurred with the Unified Payments Interface (UPI), which in October 2024 alone processed over 16.58 billion transactions worth ₹23.49 lakh crore.
Composition by Assets
Public sector banks remain dominant, with nearly 65% of market share, led by the State Bank of India (SBI) and its 22,141 branches. Private sector banks, however, have steadily risen to claim 30% of assets, with HDFC Bank (₹14.63 lakh crore market cap) and ICICI Bank (₹9.97 lakh crore) at the forefront. Foreign banks and small finance banks hold 4% and 1% shares respectively, catering to niche segments and underbanked populations.
Market Size and Growth
The retail banking market, valued at ₹13.20 lakh crore (USD 158.99 billion) in FY2025, is expected to grow to ₹22.68 lakh crore (USD 273.38 billion) by FY2032. The private banking segment, currently ₹3.96 lakh crore (USD 47.73 billion), is projected to reach ₹6.57 lakh crore (USD 79.12 billion) by 2030. The top 10 banks together command a market capitalization exceeding ₹43.61 lakh crore, reflecting investor confidence. India also leads globally in digital finance, contributing 49% of real-time payment transactions worldwide.
Between 2019 and 2024, credit grew from ₹97.71 trillion to ₹164.32 trillion, and deposits from ₹126.4 trillion to ₹212.5 trillion, both at an 11% CAGR. However, by May 2025, credit growth slowed to 8.97%, reflecting a cautious lending approach and focus on asset quality.
Profitability and Market Leaders
HDFC Bank remains the sector leader, strengthened by its 2023 merger with HDFC Ltd. ICICI Bank follows, excelling in digital banking and operational efficiency. SBI, with a market capitalization of ₹7.40 lakh crore, continues as a state-owned powerhouse, posting the highest net profit at ₹697 billion (USD 8.4 billion) in FY2024. Kotak Mahindra Bank leads on return on assets (2.7%), while ICICI Bank reports one of the best cost-to-income ratios at 43%.
Competitive Dynamics and Digital Revolution
Fintechs and NBFCs have added disruption, raising ₹158 billion (USD 1.9 billion) in 2024. Their agility in payments, lending, and wealth services has pushed banks to embrace Banking-as-a-Service, AI-driven credit assessment, and customer-centric innovations. UPI dominates with over 80% of retail digital payments and is projected to reach 91% by 2028–29.
Conclusion
With total assets crossing ₹400 trillion, the Indian banking sector is at the forefront of technological change and financial deepening. While growth is moderating, the focus on stability, digital adoption, and innovation positions the sector as a cornerstone of India’s goal to become a developed economy by 2047.
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