Banking and Finance Stocks in 2025: Gainers & Losers

Banking and finance stocks have always been vital in India’s equity market, and 2025 looks no different. Increasing interest rates, banking stars, credit cycle fluctuations, NPAs and digital transformation factors will all influence the behaviour of banking stocks in 2025.

Moreover, new financial services companies and NBFCs, fintechs, insurance and asset management will all create finance stocks 2025 winners and losers. In this blog, we discuss which banking sector gainers will most likely sustain their growth and which finance sector losers will most likely experience difficulties in 2025, considering business performance, macro trends and expectations in the stock market. 

Why 2025 is Important for Banking & Finance

 2025 is a year of transformation. With global inflation cooling, there will be changes in the expectations of interest rates, growth of loans, demand for credit NPAs, and trends. The stock market 2025 will also be affected by:

• RBI monetary decisions.
• The global recession fears.
• Regulation in digital lending.
• Trends in mergers.
• Infrastructure lending.
• The retail credit boom.

This implies that certain banking stocks 2025 might have a high potential for growth, while others will likely have margin pressure.

 

 

Key Themes Driving the Sector in 2025 

1. Growth in Retail Credit 

Retail credit is now the biggest revenue contributor for most private banks, NBFCs and fintech lending platforms.

 

2. Growing Competition 

New fintech players are challenging incumbent banks in payments and in the consumer lending space.

 

3. NPA Stabilization 

Public sector banks have improved the quality of their assets after the Clean-up Cycles.

 

4. Elevated Competition for Deposits 

Banks are competing for deposits in the volatile environment which is pressuring their net interest margins.

 

5. Digitalization 

Future profitability is being driven by digital banking and AI underwriting. 

 

 

Top Earning Banks in 2025 

 From all indications, these businesses will continue to perform well.  

 

Private Banks  

• ICICI Bank  

- Improvements in customer service.  

- Excellent risk management procedures.  

- Quality and stable assets.  

- Steady earnings increase.  

 

• HDFC Bank  

- Overall best in the Indian credit rating increase.  

- Competitive savings and current account.  

- Excellent credit rating and stable access to poor credit.  

 

• Axis Bank  

- Gaining more retail.  

- Corporate credit is better.  

- Non-performing assets are less. 

 

Public Sector Banks 

• State Bank of India  

- Most NPAs.  

- Higher digitalization.  

- Market share leader.  

 

• Bank of Baroda  

- Corporate cycle recovery.  

- Profitable.  

- Retail strong.  

 

• Punjab National Bank  

- Better.  

- Quality assets are better.  

 

 

Top 5 in Finance Sector in 2025 

 In addition to these banks, the following finance companies will likely perform well in 2025:  

 

• Bajaj Finance  

- Retail leading.  

- Financially strong.  

- Digital ecosystem.  

 

• Cholamandalam Investment  

- Vehicle finance leader.  

- Lending strength in rural areas.  

 

• HDFC Life  

- Rising in insurance.  

- Long-term growth.  

 

• ICICI Lombard  

- General insurance.  

 

Underperforming Banks  

These banks won't necessarily lose money, but they will likely not perform as well as the others:

 

Small Public Sector Banks 

• High Credit Risk: Small public sector banks tend to take on more credit risk compared to other banks.
• Lower CASA: These banks have a lower rate of CASA (Current Account Saving Accounts) deposits.
• Slower Digital Adoption: Small public sector banks are slower to adopt advanced banking technology compared to some of their competitors.

 

Other Banks with High Unsecured Portfolios 

• Higher NPA Risk: Other banks with a high proportion of unsecured loans such as personal loans are at some risk of incurring more losses to their portfolio.
• Consumer Finance Slowdown Possibility: These banks are also at risk of suffering losses from a slump in demand for such consumer finance loans.

 

 

Potential Losers in Finance Sector 

Some NBFCs 

• Funding Cost Rising: Some Non-Bank Financial Corporations (NBFCs) are expecting their costs of funding to increase.
• Liquidity Pressure: These NBFCs also expect to experience some pressure on their liquidity.
  
  

Fintech Lending Without Profit Visibility 

• High Acquisition Costs: There are fintechs in the market that incur high costs to acquire new customers.
• Compliance Pressure: These fintechs also incur high costs to comply with regulatory requirements designed to control their lending.
• Regulatory Tightening: Such fintechs are subject to complex regulatory environments designed to control their lending practices.

 

Banking & Finance Themes to Watch 

• Interest Rate Movements: Falling global interest rates could help improve the interest margins of strong lenders.
• Credit Growth: Growth in corporate and retail credit is expected to rise from 12-14%.
• Digital Lending Regulation: Fintech lenders whose business models rely on digital lending could face new strict regulations to help control and increase oversight on their lending practices.
• Capital Raising: Some NBFCs and smaller banks may have unmet funding needs and are likely to raise capital to help finance their business growth.

 

What Factors Should Investors Pay Attention To? 

When deciding which banking and financial stocks to invest in for 2025, investors should keep an eye on the following factors:

 

Gross and Net Non-Performing Assets (GNPA & NNPA) 

• Growth of the loans issued.
• Ratio of Current Account and Saving Account (CASA).
• Credit expenditures.
• Return on Equity and Return on Assets (ROE and ROA).
• Mix of loans and other products.
• Quality of loans issued.
• 2025 Strategic Perspective. 

The banking cycle in India is in a multi-year uptrend phase. Even if there are negatives in the short-term, the banking and finance sector in the Indian Economy is one of the best and strongest growth stories in the stock market for 2025.

 

Investment Target Audience 

• Investors with a long-term strategy.
• Systematic Investment Plan (SIP) Investors.
• Investors with portfolios based on the financial sector.
• Thematic Investors.
• Banking and finance stocks are a significant holding for the majority of Indian investors. 
  

 

 

Conclusion

Investing in banking stocks 2025 due to the growth and the current credit climate in the Indian economy would be a good idea. For investing in finance stocks in 2025, there are likely to be some obstacles with stocks relating to insurance, Non-Banking Financial Companies (NBFC) and digital lending which makes the process of stock selection critical.  

If an investor concentrates on banking stocks that are anticipated to perform well and steers clear of the finance stocks that are predicted to perform poorly, the investor should be able to navigate the stock market 2025 with confidence. 

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.