State-owned banks' credit share continues downward trend, albeit slower

PSBs' credit share fell by 4 per cent from FY21 to FY25, a slower rate of decline than the approximately 20 per cent between FY11 and FY21

Public sector banks' (PSBs) credit share fell by approximately 20 per cent between FY11 and FY21. However, this fall has been relatively modest since then, amounting to only around 400 basis points or four per cent from FY21 to FY25.  According to Motilal Oswal Financial Services, the decline was arrested because PSBs began participating in growth opportunities and deploying excess liquidity on their balance sheets. 

  The recovery in asset quality, healthy capitalisation levels, and profitability alongside healthy systemic growth likely contributed to this trend. Meanwhile, private banks have successfully doubled their market share to 43 per cent in FY25 from 21 per cent in FY25, driven by their focus on higher-margin retail loans, digital banking, and superior customer service, allowing them to capture a dominant share of the incremental credit market. 

    The Reserve Bank of India India’s 'Report on Trend and Progress of Banking in India FY2024' has it that the share of PSBs in the consolidated balance sheet of banks fell to 55.2 per cent in FY24 from 57.6 per cent at in FY23, with that of private banks increasing to 37.5 per cent from 34.7 per cent during this period.