Private sector banks’ (PVBs) market share in deposits and advances has doubled in the last two decades even as public sector banks’ (PSBs) share in these two key business parameters declined below 60 per cent, going by RBI data.

This shift in market share comes in the backdrop of four new PVBs – Kotak Mahindra Bank, Yes Bank, IDFC First Bank and Bandhan Bank – being set up in the last 20 years and banks in this space aggressively chasing business even as the PSB space saw a series of amalgamations, beginning with the merger of State Bank of Saurashtra with State Bank of India in 2008 and culminating with the consolidation of 10 PSBs into four in 2020.

Industry experts say despite ceding some market share to nifty PVBs rivals, PSBs have performed creditably despite their lending business getting hobbled following the 2015 RBI-mandated asset quality review (which required them to recognise and address hidden stress, reclassify previously restructured loans as bad loans and step up provisioning) and subsequent imposition of prompt corrective action (PCA) on 11 PSBs.

As at March-end 2024, PSBs’ market share in scheduled commercial bank deposits and advances declined to 59.3 per cent (from 77.9 per cent as at March-end 2004) and 55.5 per cent (73.2 per cent), respectively.

Share doubles

PVBs’ market share in scheduled commercial banks deposits and advances doubled to 34.8 per cent (from 17 per cent as at March-end 2004) and 40 per cent (19.8 per cent), respectively.

In March 2018, veteran banker Uday Kotak (then Executive Vice-Chairman and Managing Director, Kotak Mahindra Bank) had observed that PVBs’ market share will go up significantly and be on a par with that of PSBs in the next five years. “If you look at the numbers, for example, on a delta basis, nearly the entire growth in loans is happening in private sector banking, whose share is growing pretty significantly.

“I am happy to make a statement that in the next five years, the 70:30 ratio will move towards 50:50. This major mega trend in the redefinition of the industry structure is something which is playing out as we talk,” Kotak then said.

However, PSBs seem to have got their mojo back, shaking off bad loans, getting out of PCA (which was imposed by RBI to nurse weak banks back to health), clocking robust growth in retail and MSME loans and embracing digital lending, among others.