Public Sector Banks Outpace Private Banks in Loan Growth for the First Time Since 2011

Strategic Insights -

For the first time since 2011, public sector banks (PSBs) have surpassed private sector banks (PVBs) in loan growth, with PSBs recording a 13.1% year-on-year loan growth compared to 9% for PVBs at the end of FY25. The strong performance was across multiple segments, including traditional areas like mortgages and corporate loans, as well as various non-mortgage retail segments such as auto loans. This trend is a significant departure from the historical dominance of private banks in loan growth.

Key Takeaways:

  • Public sector banks (PSBs) outpaced private sector banks (PVBs) in loan growth for the first time since 2011, with a 13.1% year-on-year loan growth compared to 9% for PVBs.
  • The strong performance was across multiple segments, including traditional areas like mortgages and corporate loans, as well as various non-mortgage retail segments such as auto loans.
  • PSBs had a total loan portfolio of Rs 98.2 lakh crore, representing 52.3% of the market share, while PVBs had a loan base of Rs 75.2 lakh crore, accounting for 40% of the total loans.
  • The top 5 PSU banks grew their corporate loans by 10%, while private banks saw less than 4% growth.
  • On retail loans, while the top five PSU banks grew their book by over 22%, private banks saw less than 12% growth.
  • Analysts suggest that PSBs are relatively better placed to handle margin pressures due to the high share of MCLR, which ranges between 52-60%.
  • Private sector banks have been flagging the increased aggression from public sector banks and the resultant increase in growth and profitability pressures.

Statistics:

  • 13.1%: Year-on-year loan growth for PSBs at the end of FY25
  • 9%: Year-on-year loan growth for PVBs at the end of FY25
  • 52.3%: Market share of PSBs' total loan portfolio
  • 40%: Market share of PVBs' total loan portfolio
  • 10%: Average growth of top 5 PSU banks in corporate loans
  • 4%: Average growth of private banks in corporate loans
  • 22%: Growth of top five PSU banks in retail loans
  • 12%: Growth of private banks in retail loans
  • 52-60%: Range of MCLR loans held by PSBs

Sources:

  • RBI data
  • Bernstein analysis
  • Yes Securities note
  • ICICI Bank post earnings analyst call on April 19
  • HDFC Bank post earnings analyst call on April 19