Govt banks lose share on slower corp demand

livemint.com:

MUMBAI : Pushed back by a lull in private sector investments, India’s state-owned banks continued to lose market share in loans to private rivals, showed data from the Reserve Bank of India (RBI). The loss in market share was visible in deposits too. The share of public sector banks in deposits shrunk 119 basis points (bps) between March and September 2023.

In loans, this declined 296 bps over the same period. One basis point is one-hundredth of a percentage point. Experts attribute this to the lack of pickup in corporate loan demand, even as nimbler private sector lenders rolled out credit on the retail side, attracting borrowers and savers alike.

Although public sector banks have been trying to lean more towards retail loans, corporate loans continue to be one of their largest categories. “Public sector banks generally have higher inclination towards lending to the manufacturing sector and other corporate entities, as compared to private peers who have greater accent on the retail sector," said Suresh Khatanhar, deputy managing director, IDBI Bank. IDBI Bank used to be a public sector bank until the RBI reclassified it as a private bank in January 2019 after the Life Insurance Corp.

of India (LIC) bought a 51% stake in the bank. “While PSU banks also have a focus on retail, agri and MSME (popularly called the RAM sectors), private lenders are relatively focused higher on the retail front, especially on digital acquisition of customers," Khatanhar said. Bankers said that capital expenditure, barring investments by the government, is relatively low, and private capex is muted.