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Private Banks Win Deposit War, PSU Banks Lead Credit
7 Jul
Summary
- Private banks saw 14.3% deposit growth versus 10.7% for public banks.
- Public sector banks grew loans 16.4%, slightly faster than private banks' 15.9%.
- PSU banks' loan-to-deposit ratio increased to 81% from 77% year-on-year.
In the June quarter, private sector banks demonstrated superior deposit mobilization, outpacing public sector banks (PSBs) by 3.6 percentage points. Private lenders achieved a 14.3% year-on-year deposit growth, while PSBs managed 10.7%. This highlights a decade-long trend where PSBs have lost significant deposit market share to private banks.
However, the scenario reversed in credit growth. PSBs' loan books expanded by 16.4% year-on-year, slightly exceeding the 15.9% growth seen in private banks. This faster credit growth coupled with slower deposit accretion has pushed the aggregate loan-to-deposit ratio for PSBs to 81%, up from 77% a year ago.
Analysts note that private banks are better funded despite high loan deployment, while PSBs are increasingly relying on surplus liquidity for loan expansion, which gradually erodes their historical liquidity cushion. This divergence underscores the ongoing structural shift in the Indian banking landscape.
