State-run banks charge up, capture half the credit market

For the first time in nearly a decade, nationalised banks have managed to grab 50 per cent share of the loans extended during the last financial year (FY09).

According to the latest data released by the Reserve Bank of India today, nationalised banks accounted for 50.5 per cent of the gross bank credit at the end of March 2009, as against 48.3 per cent a year ago . Along with the State Bank of India group, banks in which the government owned a majority stake cornered 73.6 per cent of the gross bank credit — 2.5 per cent higher than the year-ago level.(Click for table)

Almost the entire gain was on account of the ground lost by private and foreign banks, which slowed down lending in the wake of the global credit crisis and the fear of defaults in India. As a result, foreign and other scheduled banks saw their share of the credit market fall below the 25 per cent mark, while regional rural banks held on to their share of the business.

According to the RBI’s Trends and Progress report, nationalised banks had a share of over 50 per cent of the total assets of the banking system way back in March 1999.

Even in case of deposits, nationalised banks were closing in on the halfway mark. But unlike the loans market, SBI and its associates managed to grab a larger share as investors, both corporate and individuals, moved cash from private and foreign banks in the aftermath of the Lehman Brothers collapse in September.  Besides, public sector banks increased deposit rates more significantly than their private and foreign counterparts with SBI offering 10.5 per cent for its 1,000-day deposits.