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Private banks' share in credit to reach 40% by 2020, says Icra

Banking industry reported marginal growth of 2.2% in FY17, as compared with 6.9% in FY16

Abhijit Lele  |  Mumbai 

Govt infusion in banks still short, say Icra & Fitch

Private have been taking the space vacated by capital-short in the credit market. Private banks’ share in banking sector advances will reach 38-40 per cent by March 2020, from 27.5 per cent in March 2017, according to rating agency

Indian banking is going through a transition, with private and (PSBs) facing different challenges. The latter are plagued with asset quality issues, leading to higher credit costs and losses, said. 

As a result, capital-short PSBs have been constraining their lending. Their tier-I was 9.7 per cent of risk-weighted assets as on end-June, against the 9.5 per cent required by regulations by end-March, 2019. 

advances grew less than one per cent over a year before during the June (Q1) this financial year.

In contrast, private banks’ tier-I was 14.1 per cent as on end-June, well capitalised to capture the lending opportunities ceded by PSBs. Their year-on-year growth in advances during Q1 was 15.3 per cent.

Assuming incremental market share of 80 per cent for private and credit growth of 7-9 per cent for the sector during FY18-20, the market share of private is expected to increase to 38-40 per cent by FY20. The banking industry reported marginal growth of 2.2 per cent in FY17, compared with 6.9 per cent in FY16. The growth in advances was mainly led by a rise of 14.4 per cent in advances of private banks; those of PSBs dropped 0.6 per cent in FY17.

First Published: Fri, September 22 2017. 01:41 IST