'Private banks' loan growth to be double of PSBs till 2019'

Private sector bank credits will see a compound annual growth rate (CAGR) of 24 percent till fiscal 2019, as compared to 12 percent for the state-run ones, a joint study by industry chamber Assocham and ratings agency Crisil said on Tuesday.

"Advances of private banks are likely to grow at a compounded annual growth rate of 24 percent between fiscal years 2016 and 2019, materially ahead of 12 percent for public sector banks over the same four-year period," the report said.

"Private banks are expected to play an increasing role in banking sector's growth over the medium term, given their strong balance sheet, large presence in retail segment and strong, low-cost liability franchise," said the study titled "Indian banking sector: The changing landscape".

Bank credit growth, which remained muted at around eight percent in first half of the current fiscal, is expected to remain subdued at about 11 percent in the full fiscal as credit demand from corporate sector remains muted, it said.

"Near term growth will be driven by sectors like retail, agriculture, small and medium enterprises segments in private banks' advances," the report said.

"Private banks have developed an expertise and can offer quick end-to-end solutions to customers in these segments as they have invested significantly in developing branch network, retail franchise and technology platforms," it added.

Private banks have grown at a CAGR of 20 percent between fiscals 2010-2015 compared to 16 percent CAGR clocked by public sector banks (PSBs), Assocham said in a statement here.

"PSBs will be forced to focus on reorienting their business model and become more competitive and will need to increase focus on improving their performance instead of chasing growth," the report said.

It also said small and medium PSBs will face "greater challenges" and have to focus on developing regional expertise and small-ticket lending in retail and SMEs segments.

"PSBs will face strong competition from private banks in the low yield segments like mortgage, auto and from non-banking finance companies in the high yield segments like loan against property, used vehicles, personal loan, gold loan and others," it said.

Within private banks, growth is driven by new private banks, whose advances grew by 21 percent CAGR over fiscals 2010 and 2015, compared to 17 percent for old private regional banks, Assocham said.