KPMG in India-CII Report Reflects Kerala’s Role in Driving Inclusive Growth

KOCHI:
KPMG in India, in collaboration with CII, today released a report titled – “Improvisation driving Performance – how the financial services sector in Kerala has grown to pack a punch, and influence the national narrative” at the CII Kerala Banking & NBFC Summit 2025, held in Kochi on 10th October. The report showcases the unprecedented transformation underway in the Indian Banking, Financial Services, and Insurance (BFSI) sector and highlights Kerala as a dynamic and increasingly business friendly destination influencing the national financial landscape through innovation, inclusion, and sustainability. The report also tries to query areas where developments still need accelerating, or fresh thinking might be required to make the dimensional move ahead.

The BFSI sector in India has surged to a valuation of ₹91 trillion in 2025, powered by digital infrastructure advancements like UPI, Aadhaar, and Account Aggregators. Kerala’s financial ecosystem, known for its strong cooperative banking heritage and innovative NBFCs, is a microcosm of this national evolution. Home to India’s leading gold loan NBFCs and prominent NRI banking institutions, Kerala is setting benchmarks that resonate across the country.

Vishnu Pillai, Financial Services Technology Leader and Office Managing Partner – Kochi, KPMG in India, said, “The transformation of India’s BFSI sector is not just about growth in numbers—it’s about redefining finance as a platform for inclusive opportunity, technological leadership, and societal resilience. Kerala stands out as a beacon of this new paradigm, where innovation meets purpose. By seamlessly blending traditional financial excellence with cutting-edge digital infrastructure and sustainable finance principles, Kerala’s BFSI ecosystem is not only driving state-level socio-economic progress but also contributing to defining the future of India’s financial services. Our challenge—and opportunity—is to build on this momentum, ensuring that finance reaches the last mile, adapts swiftly to emerging risks, and remains a trusted catalyst for inclusive and sustainable growth.”

Key Highlights from the Report:
Redefining Finance as a Platform for Inclusive Opportunity
· India’s BFSI sector is transforming into a strategic enabler of inclusive growth, moving beyond traditional banking to serve underserved populations.
· Kerala is leading in financial inclusion with pioneering microfinance, MSME lending, and women-focused financial products reaching rural and semi-urban areas.
· The sector is bridging gaps by leveraging local demographics and financial literacy to unlock credit for millions, driving socio-economic development.
Technological Leadership Driving Transformation
· Digital-first Ecosystem: Kerala is leveraging technology such as AI-driven underwriting, blockchain, and cloud-native platforms, accelerating customer-centric innovation and operational efficiency.
· Kerala’s BFSI players are rapidly adopting AI-driven underwriting, blockchain for secure payments, and cloud-native infrastructure for agile service delivery.
· Fintech partnerships and ‘human-light’ engagement channels are expanding financial services to new customer segments, including gig workers and thin-file borrowers.

Building Societal Resilience Through Sustainable Finance
· Sustainable Finance Commitment: Financial institutions in Kerala are embedding ESG principles, supporting green loans, and climate-resilient agricultural financing, aligning with national sustainability goals.
· Community finance initiatives like Kudumbashree drive social empowerment and environmental resilience, serving over 46 lakh women through microcredit and savings.
· The BFSI sector is pioneering sustainability-linked financing, reflecting a shift from voluntary commitments to measurable environmental and social impact.

Shaping the Future of Financial Services in India
· Gold Loan Market Leadership: Kerala-based NBFCs command nearly 90% of India’s organized gold loan market, with loan books surpassing ₹1.2 trillion, expanding rural credit access significantly.
· NRI Banking Dominance: Kerala banks hold deposits over ₹3 trillion, growing steadily and driving advanced remittance services that support millions of families across India.
· Cooperative Banking Reforms: Kerala’s apex cooperative bank has unified multiple district banks onto a single core banking platform, serving over 15 million customers with a focus on MSME and agriculture lending.
· Fintech and Startup Growth: With over 200 fintech startups backed by ₹500 crore funding, Kerala’s fintech ecosystem is rapidly expanding, promoting financial inclusion and fostering innovation. With regulatory agility and digital infrastructure maturity, Kerala is well-positioned to pioneer embedded finance, digital currencies, and next-gen ESG lending.

The challenge ahead lies in bridging legacy system gaps, enhancing cybersecurity, and aligning state policies to foster inclusive, frictionless, and future-ready finance.

The report also emphasizes the role of regulatory agility and the growing importance of cybersecurity as Kerala’s BFSI sector evolves to meet future challenges.

As India’s BFSI sector stands poised at the cusp of further innovation—driven by embedded finance, digital currencies, and ESG-linked lending—Kerala’s role is pivotal in shaping policies, products, and delivery models that benefit millions across urban and rural India. One particular area that the state could improve upon is visibility – for all the great developments that are playing out in its financial services sector. This visibility will aid also in leveraging these innovations to a national scale – thereby aiding other states and institutions with the tailwinds that they require in areas that Kerala already excels in.