As we ring into 2024, the financial services sector is poised to enter another interesting phase, something we have not witnessed in several decades. Whether banks, fintechs or insurance companies, the optimism, which was pronounced last year, has little reason not to sustain. But the regulatory terrain is also tightening, preparing the sector for a new phase of growth, keeping customers’ interest at fore, and so is the absolute cost of doing the business. Will this deter players in the BFSI space? Not quite, is the verdict and here’s why:

Private banks

On par with industry standards, growth was barely a concern for private banks, with many of them outpacing the average. What plagued the sector was stronger competition for deposits and consequent pressure on interest rates amid robust borrowing demand. This is expected to continue into 2024 as lending competition intensifies, and given that interest rates are expected to remain elevated for the next few quarters.

Analysts expect the impact of the higher risk weights to be felt most by private banks due to their higher share of unsecured loans, and the least by small finance banks owing to a large part of their portfolios being eligible under priority sector loans. Combined with increasing cost of funds, net interest margins (NIMs) of banks are seen compressing further in 2024.

That said, the strong fundamentals, which most private banks demonstrated in 2023, could keep them in good stead. Yet, an intangible factor to watch out for would be the rising cases of small-ticket frauds and cyber attacks. We could expect banks to invest more in strengthening their back-end systems and cyber security to combat these risks.

Also, with piling pending cases under IBC and RBI flagging risks such as connected lending, ever-greening of loans through alternative investment funds, compliance and governance will be top priority for the industry.

PSU banks 

The main highlight of state-run banks is their dream run on the bourses, with their asking rates flipping from less than their book value until mid-2023 to trading closer to their book value or shades above as they closed the year. After almost a decade, valuations of PSU banks are showing promising signs, though still far from catching up with the rich valuations of their private counterparts. Many factors, including healthy balance sheets, robust credit growth, strong margins, decadal low non-performing assets and strong capital position, has helped PSU banks, and these factors aren’t expected to be challenged much. Motilal Oswal Financial Services, in its recent research report, took an optimistic view on the sector, stating that the broader re-rating in PSU entities will enable steady performance of the sector.

Perhaps, there could be trigger to raise capital as the effect of higher risk weights for unsecured retail loans settle down by March 2024.


Even as the increased risk weights on consumer loans could slow down growth in unsecured lending, overall demand sentiment continues to be robust. This is the feedback businessline received when we asked top NBFC chiefs on how they see the year ahead. Going into 2024, the focus is expected to remain on retail (vehicle and housing loans) and MSME lending. Gold loan NBFCs are also seen benefitting from the recent regulatory changes, as it is nudging customer towards asset-backed borrowing. Exect personalised and customised products, supported by digital initiatives and better data collection from non-banks.

NBFCs are deeply investing into AI/ML and believe that technology will play a crucial role in democratising financial services and reaching the underserved.

 As for housing finance, the growing low- and middle-income segment, combined with increasing preference towards nuclear families and home ownership, remains key growth drivers. While prime property mortgages may remain in vogue, watch out for affordable housing lenders — a pocket expected to grow 17-18 per cent CAGR in the next five years.


Indian fintech industry stands on the precipice of transformation as it looks to reshape the financial landscape in rural, semi-urban and urban India. The sector has seen robust demand for credit, including micro-lending platforms, mobile banking applications and digital literacy initiatives. This has also led to regulations tightening around how credit is dispersed.

With the rise in fintech lending and cyber threats, it necessitates ongoing investment in cybersecurity. The spotlight could well be on regtechs or fintechs that specialise in integrating finance with regulations integrating AI, blockchain and cloud computing for compliance in the face of growing regulatory complexity. The government is getting stricter about the right kind of processes to prevent citizens from being defrauded, which means the fiduciaries must work with the right KYC partners for customer onboarding.

Fintechs are also introducing new products with the objective of covering everything ‘money-related’ from an user perspective, leading to a rise in super apps.

 Urban co-operative banks

UCBs are witnessing consolidation, with financially weak players walking down the aisle with stronger counterparts, as competition in their traditional forte (MSME sector) is heating up. Mainline banks, small finance banks and NBFCs are giving them a run for money. The RBI, in a recent report, also acknowledged the shirking relevance of UCBs with their aggregate balance sheet size to the total banking system reducing from 19.4 per cent in FY05 10.3 per cent in FY21.

Blurring lines between scheduled commercial banks, rural co-operatives and urban co-operatives is a big challenge to combat for UCBs, and ensure they don’t get cornered as a fringe player in the financial services landscape. With nearly hundreds of UCBs pushed away from the terrain in the last two years, will the Ministry of Co-operation, created in 2021 and the new umbrella organisation established to cement the position of UCBs, help the ecosystem in 2024?


Life insurance industry was cruising at a decent clip in FY24 until an IRDAI exposure draft on surrender value muddied the waters in December. If implemented, it could significantly hurt their profitability from the non-linked savings products, thereby eroding value of new business for the players. However, CEOs in the sector that businessline spoke to, weren’t perturbed by this proposal.

Life insurance sector has adapted to the challenge thrown by Budget 2023-24, where tax was levied on certain life insurance policies. Till November 30, 2023, total new business premium of life insurance industry declined 12.7 per cent year-on-year at ₹2.12-lakh crore, thanks to the tax changes. With this effect settling down, the low base effect should help the sector stage a strong comeback. Certain softer aspects, such as innovation, technology improvement, and simplification of products, should also aid growth.

The general insurance industry, which was on a roll in 2023, expects no speed bumps in its journey. The growing preference towards health insurance visible from the gross written premium (up 14 per cent for GI from April-November 2023 at ₹1,88,200 versus health insurance GWP up 21.1 per cent year-on-year during this period to ₹70,480 crore) is expected to sustain with more players focussing on hybrid products, particularly in life insurance sector, to find a foot in the sector .


The insurance sector is expecting the maximum bonanza from its regulator, Insurance Regulatory and Development Authority of India (IRDAI), in 2024. Three major initiatives — Bima Sugam, a one-stop digital platform; Bima Vistar, an all-in-one affordable insurance cover; and Bima Vahak, a women-led-field distribution force — will be the major attractions to look forward to this year. Popularly called the ‘insurance trinity’, these initiatives are expected to be game-changers for the sector, bridging the existing gaps in the product design, pricing and distribution. 

In terms of increasing insurance penetration, the Lead Insurer Scheme is expected to yield tangible results in expanding the reach of insurance products, while the new draft product design norms, including a proposal for higher surrender value for non-linked products and lower charges for insurers, will take effect soon.