In a sense, the banking sector is the heart of an economy as it maintains liquidity by channeling credit from savers to borrowers. Like a well-oiled machine that works tirelessly, a robust banking system lubricates all parts and sectors of the economy and contributes to economic growth. Given the improving loan quality, interest rate cut, and expected increase in savings, it would be prudent for investors to take a close look at some of the best banking stocks in India.
To elaborate, a nation needs a healthy banking system with good asset quality to fuel growth. The proportion of non-performing assets—loans or advances given by a bank that are in default or arrears—-is a measure of the banking system’s health. Indian banks’ gross non-performing assets (GNPA) or bad loans ratio fell to a 12-year low of 2.6 percent, driven by falling slippages and steady credit demand, according to the Reserve Bank of India’s (RBI) December 2024 Financial Stability Report. The financial health of Indian banks is at a decade high, making banking stocks a great investment opportunity.
The tax breaks announced in the Union Budget 2025 will boost savings and liquidity in the economy. The Indian banking system may see healthy deposit growth in the coming year as it benefits from increased savings. RBI’s 25 basis points (bps) rate cut which will make borrowing cheaper, and an expected increase in deposits make the banking stocks even more attractive. This blog post will discuss India’s best banking stocks by market capitalization.
Read on to learn about metrics like the PE ratios of some of the best banking stocks by market capitalization.
Banking industry in India: An overview
The Indian banking sector, including public and private banks, transformed in the past decade. For one, the industry successfully addressed challenges such as high non-performing assets (NPAs). This was complemented by regulatory reforms and improved management practices that fostered a healthier banking environment.
The implementation of the Insolvency and Bankruptcy Code (IBC) has also played a crucial role in addressing bad loans. Indian banks’ balance sheets are much cleaner now. As private borrowing picks up, banks will see significant growth in their business and top and bottom lines. This makes banking an attractive sector for investment. Here are the top 10 banking stocks in India by market capitalization.
Top 10 Bank Stocks in India in 2025 (as per market capitalization)
Here are the top 10 best bank stocks by market capitalization.
| Number | Bank | Market Cap (in Rs. Cr) | PE Ratio | Dividend Yield |
| 1 | HDFC Bank | 1321762 | 19.00 | 1.13 |
| 2 | ICICI Bank Ltd | 889556 | 18.01 | 0.81 |
| 3 | State Bank of India | 648552 | 8.06 | 1.89 |
| 4 | Kotak Mahindra Bank Ltd | 394486 | 20.05 | 0.10 |
| 5 | Axis Bank | 313223 | 11.03 | 0.10 |
| 6 | Bank of Baroda | 108055 | 5.33 | 3.58 |
| 7 | Punjab National Bank | 106769 | 6.39 | 1.61 |
| 8 | Union Bank of India | 87710 | 5.29 | 3.18 |
| 9 | Indian Overseas Bank | 87537 | 28.30 | 0.00 |
| 10 | IndusInd Bank Ltd | 80624 | 11.16 | 1.63 |
Source – Screener.in as of 19 February 2025
Overview of best banking stocks in India by market capitalization
1. HDFC Bank
HDFC Bank is India’s largest private sector bank by assets and the world’s tenth-largest bank by market capitalization as of May 2024. HDFC Bank has robust retail banking services and strong asset quality. The bank has consistently delivered impressive financial results and has a significant market share in retail loans and deposits.
In July 2023, the company completed its merger with its promoter, HDFC Ltd. With this merger, the bank operates across various segments, including banking, insurance (through HDFC Life Insurance and HDFC Ergo General Insurance), and asset management (via HDFC Asset Management).
2. ICICI Bank Ltd
ICICI Bank is the second-largest private sector bank in India which offers a wide range of financial products and services to retail, SME, and corporate customers. The bank has an extensive network of branches, ATMs, and other touchpoints. ICICI group is present in businesses like life and general insurance, housing finance, and primary dealerships through its subsidiaries and associates.
ICICI Bank has established itself as a leader in innovation within the banking sector, offering a comprehensive suite of financial products. Its strong digital presence and focus on customer-centric solutions have contributed to its rapid growth.
3. State Bank of India (SBI)
State Bank of India is a Fortune 500 company. It is India’s largest public sector bank headquartered in Mumbai. The bank has a market share of 22.84% in deposits and 19.69% share in advances in India. It has a strong customer base of about 45 crore customers.
Additionally, SBI has always been the banker of choice to the government of India and is the market leader in government business.
4. Kotak Mahindra Bank Ltd
Kotak Mahindra Bank is a private sector diversified financial services group providing a wide range of banking and financial services, including Retail Banking, Treasury and Corporate Banking, Investment Banking, Stock Broking, Asset Management, Life Insurance, and General Insurance.
The bank ranks fourth in deposit and gross advances market share. Its securities broking business held an 11.8% market share in FY24, while the asset management business had a 6.5% market share.
5. Axis Bank
Axis Bank is a private sector bank with the third-largest network of branches among private sector banks in India. It has an international presence through branches in DIFC (Dubai) and Singapore along with representative offices in Abu Dhabi, Sharjah, Dhaka, and Dubai and an offshore banking unit in GIFT City.
Axis Bank is the third-largest private sector bank in India, the fourth-largest issuer of credit cards in India, and commands a 19.8% market share as of FY 2024.
6. Bank of Baroda (BOB)
Bank of Baroda is a public sector bank that provides a wide array of services such as personal banking and lending, corporate banking, international banking, small and medium enterprise (SME) banking, rural banking, non-resident Indian (NRI) services, and treasury services.
BOB is among India’s top five banks by asset size and total deposits, with a 6% market share as of FY24.
7. Punjab National Bank (PNB)
Punjab National Bank is India’s third-largest public sector bank after SBI and BOB. The New Delhi-headquartered bank primarily operates in north and central India. PNB offers services such as retail banking, corporate and wholesale banking, insurance, and treasury.
The bank operates in six countries, with branches in Dubai and GIFT City, Gujarat, serving its international business. It also has two subsidiaries in London, UK, and Bhutan, a JV in Nepal, and representative offices in Myanmar and Bangladesh.
8. Union Bank of India
Union Bank of India, a public sector bank, provides retail banking services, merchant banking, corporate and wholesale banking, insurance, mutual funds, and wealth management.
It is the fifth-largest public sector bank with a 6% deposit share and a 5.5% share in net advances as of FY 24.
9. Indian Overseas Bank (IOB)
Indian Overseas Bank, founded in 1937, is a public sector bank headquartered in Chennai. IOB provides diverse banking products and services, including retail banking and loans, wholesale and corporate banking, treasury, credit cards, and online banking.
10. IndusInd Bank Ltd
IndusInd Bank Limited, incorporated in 1994 as a commercial bank, is a private sector bank. The bank is publicly held and provides a wide range of banking products and financial services to corporate and retail clients, besides undertaking treasury operations. It primarily caters to the Indian market.
IndusInd Bank is the fifth-largest private sector bank in India, serving over 40 million customers nationwide. It is India’s second-largest microfinance lender, operating through its subsidiary Bharat Financial Inclusion Limited (BFIL), which serves over 13 million customers.
Factors to consider before investing in banking stocks in India
We have listed the best bank stocks by market capitalization. However, investing in banking stocks in India requires careful consideration of several key factors besides metrics such as market cap, PE ratio, and dividend yield. Here are some useful pointers to evaluate banking stocks:
1. Economic environment
The broader economic situation significantly impacts banks. Economic growth typically leads to increased borrowing, while downturns can lead to higher non-performing assets (NPAs) and reduced profitability.
2. Interest rates
RBI’s monetary policy, especially interest rates, can impact banks’ profitability. Higher interest rates can enhance net interest margins, benefiting banks. But higher interest rates may also hit borrowing as it becomes expensive which, in turn, can impact the bank’s overall profitability.
3. Asset quality
It is important to monitor a bank’s NPA trends over time. High levels of NPAs can impact a bank’s financial health and stock performance, so assessing credit quality and recovery efforts is essential.
4. Regulatory framework
Understanding the regulatory landscape is necessary, as regulatory changes can significantly impact a bank’s performance. Also, compliance with new regulations can affect operational efficiency and profitability.
5. Technological adaptation
RBI is becoming increasingly vigilant about bank online platforms and their robustness from a security and customer service point of view. Thus, banks investing in digital transformation and technology will likely be appreciated by the central bank. Besides, banks with fast online platforms and innovations in mobile banking and fintech solutions enhance customer satisfaction, positioning them better for growth.
6. Market Position
Consider banks with robust market share and competitive advantages as they are more likely to withstand economic fluctuations and deliver stable returns.
Evaluating banking stocks on these parameters would help investors identify the best banking stocks for their portfolios.
Should you invest in banking stocks?
The decision to invest in banking stocks in 2025 depends on several factors. The banking and financial sector performed well in 2024, and the momentum may continue, especially for diversified banks. To be sure, economic growth, the beginning of monetary easing, hopes of increasing deposits due to increased disposable income, and steady loan demand could favor banking stocks.
However, moderating consumer spending, especially in the urban regions, and geopolitical uncertainty present challenges. Careful evaluation of stocks on the above-listed factors and careful diversification within the sector will investors in the long run.
See best fintech stocks in india.
Conclusion
The Indian banking sector presents numerous opportunities for investors looking to capitalize on long-term growth potential amid the ongoing economic recovery. The stocks listed above represent some of the best options available based on market capitalization.
Investors should remain vigilant about market trends and economic indicators while making informed decisions based on their risk tolerance and investment goals.
