What advantage do private banks have over PSU banks in lending?

Private banks enjoy a funding cost advantage of nearly 20-30 basis points below PSU banks.

Which retail loans are seeing increased demand?

Demand is rising for high-yield retail loans like credit cards and personal loans.

How will liquidity normalization affect private banks?

As liquidity normalizes, private banks expect to gain market share in various retail lending categories.

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Private Banks Gain Edge with Lower Funding Costs

19 Nov, 2025

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Summary

Private banks possess a funding cost advantage over public sector banks.
Improving credit quality is noted in unsecured lending portfolios.
Rising appetite for high-yield retail loans like credit cards is observed.

Private Banks Gain Edge with Lower Funding Costs

Private banks are strategically positioned to expand their market share in retail lending, benefiting from a notable funding cost advantage. With incremental funding costs estimated to be 20-30 basis points lower than public sector banks, institutions like Axis Bank, HDFC Bank, and ICICI Bank are expected to capitalize on this edge.

This competitive advantage stems from their strong liability franchises and sophisticated, tech-enabled distribution networks. As liquidity conditions stabilize, this cost efficiency is anticipated to drive growth across a spectrum of retail loan categories, including home loans, auto loans, and unsecured credit.

Further bolstering this positive outlook is the observed improvement in credit quality within unsecured portfolios. Alongside this, there is a discernible rise in consumer appetite for high-yield retail loan products, such as credit cards and personal loans, indicating a dynamic and potentially lucrative market.