The public sector banks, weighed down with huge non-performing assets (NPAs), are losing their lead banking relationships with Indian corporates to their private counterparts, said a study conducted by Greenwich Associates, a banking consultant group.
“As of 2016, 20 per cent of large Indian corporates participating in the Greenwich Associates annual Corporate Banking Study said they used at least one public sector bank as a lead corporate bank. By 2018, that share had fallen to just 15 per cent. The bulk of those relationships went to private sector banks”, the study pointed out.
According to the study, private sector lender HDFC Bank and PSU lender State Bank of India top the list of local banks which are used by three-quarter of large Indian companies for corporate banking services. Private lender ICICI Bank is the third most preferred bank for the Indian corporates.
“These three banks also secure the top spots among middle market banking companies, with HDFC in first place and ICICI and SBI statistically tied at the second spot”, the study further said.
Among foreign banks, Standard Chartered Bank and Citi are tied statistically with a market penetration of 51–54 per cent among large Indian corporates, followed by HSBC at 50 per cent. In the middle market space, among foreign banks, HSBC ranks first and Standard Chartered in second and Citi a close third.
The result of the Greenwich study points out that even when PSU banks retain their status as a company’s lead credit provider, they are being cited less often as leading providers in non-credit products such as foreign exchange and cash management—roles that are being filled most often by private sector banks.
The one outlier to this trend is State Bank of India. SBI, which has moved faster and made more progress than other PSU banks to address the NPA issue, actually increased its share of lead corporate banking relationships to 6 per cent of large companies in 2018 from 4 per cent in 2016, the study added.
The study also estimates that 92 per cent of Indian companies will make a change in their corporate banking roster in 2019.