Public sector banks, weighed down by their respective non-performing assets (NPAs), are losing lead banking relationships with Indian corporate entities to their private counterparts, says a study conducted by Greenwich Associates, a banking consultant group.
“As of 2016, 20 per cent of the 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 15 per cent. The bulk of those relationships went to private sector banks”, says the study.
Further analysing the performance of individual banks, the study reveals that private sector lender HDFC and PSU lender State Bank of India top the list of local banks that are used by 75 per cent of large Indian companies for corporate banking services. Private lender ICICI Bank is the third most preferred bank by corporates.
“These three banks also secure the top spots among middle market banking companies with HDFC in the first place and ICICI and SBI statistically tied at the second spot,” says the study.
Among foreign banks, Standard Chartered Bank and Citi share the top spot with a market penetration of 51 to 54 per cent among large Indian corporate entities, followed by HSBC at 50 per cent. In the middle market space, however, HSBC ranks first, followed by Standard Chartered at second and Citi at third.
The Greenwich study also 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 banks.
State Bank of India is the only outlier in this trend, which has moved faster and made more progress than other PSU banks to address the NPA issue. According to the study, SBI has 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 also estimates that 92 per cent of Indian companies will make change to their corporate banking roster in 2019.