India's State-Owned Banks Lose Market Share to Private Rivals

Strategic Insights -

India's state-owned banks are continuing to lose ground to private sector rivals in the loan and deposit markets, with the share of public sector banks in deposits and loans shrinking significantly over the past year. According to data from the Reserve Bank of India (RBI), the share of public sector banks in deposits declined by 119 basis points (bps) between March and September 2023, while their share in loans dropped by 296 bps over the same period. This is attributed to the lack of pickup in corporate loan demand, which is a major area of focus for public sector banks.

Key Takeaways:

  • The share of public sector banks in deposits declined by 119 bps between March and September 2023.
  • The share of public sector banks in loans dropped by 296 bps over the same period.
  • Public sector banks have a higher inclination towards lending to the manufacturing sector and corporate entities, whereas private sector lenders focus more on the retail sector.
  • Experts attribute the decline in market share to low corporate loan demand and the growth of private sector lenders on the retail side.
  • The value of new project announcements in India declined to Rs.1.5 lakh crore in the September quarter, causing a significant decline in credit offtake for PSU banks.
  • The decline in market share of public sector banks has slowed down in recent years due to the cleaning up of bad loans and freeing up of lending capacity.
  • Bankers note that capital expenditure is relatively low, and private capex is muted.

Statistics:

  • The share of public sector banks in deposits declined by 119 bps between March and September 2023.
  • The share of public sector banks in loans dropped by 296 bps over the same period.
  • Public sector banks' loan market share declined by 314 bps between September 2022 and 2023, according to data from CMIE.
  • The value of new project announcements in India declined to Rs.1.5 lakh crore in the September quarter, as against Rs.5.3 lakh crore in the September quarter of FY23.
  • Basis points are one-hundredth of a percentage point.

Sources:

  • Reserve Bank of India (RBI)
  • Centre for Monitoring Indian Economy (CMIE)
  • HT Digital Content Services