State-owned banks outpace private peers in loans, claw back market share

Subscribe to enjoy similar stories. India’s public sector banks have outpaced their private sector peers in growing their loan book, regaining market share lost over the past several years when asset quality and capital concerns had weighed them down. While loans by public sector banks grew 12.4% year-on-year (y-o-y) in December, private banks saw their loan book grow 10.5%.

The gap between the outstanding loans of state-owned banks and private lenders stood at ₹21 trillion as on 31 December, against ₹19.5 trillion in September, as per data from the Reserve Bank of India (RBI). The data also showed that the share of public sector banks in the overall banking system loans is also increasing. Public sector banks accounted for 53.5% of all loans as on 31 December, up from 53.2% from 30 September.

Private lenders, on the other hand, lost market share in loans. Their share declined to 41.5% in December, from 41.8% in September, the data showed. In fact, state-owned banks have been consistently losing market share to private sector banks in the past few years.

Their share dropped from 66.7% in the June quarter of 2017 to 53.1% in June 2024, when it finally started inching up. Banking experts said this could be the result of a gradual slowdown in personal loans and that it has to do with the composition of loan books of public and private sector banks. “For private banks, the credit growth in recent years has largely been driven by personal loans, which accounted for over half of the credit growth of private banks in FY24," said Sidharth Diwan, partner, financial services, PwC India.