Public Banks Lose Market Share But Improves Recovery Percentage

News From Business Standard

Private sector banks have managed to record better growth than their public sector counterparts in the last few years as the latter remained burdened with asset quality woes.
The year 2015, has seen private sector banks wrest more market share from the PSBs.


While the PSBs continue to play a vital role in Indian economy and financial system, they have been lagging their private sector counterparts on performance and efficiency indicators.

 PSBs with a predominantly high share in infrastructure financing are observed to be facing the highest amount of stress in their asset quality and profitability.


PSBs seem to be lagging behind private banks on several fronts including asset quality, profitability, credit growth etc.

For instance, it is the PSBs that have recorded the highest level of stressed assets at 14.1 per cent followed by private banks at 4.6 per cent and foreign banks at 3.4 per cent.


Because of the pressure on asset quality, the PSBs are lending more cautiously, thus resulting in muted credit growth for them.

Within the bank-groups, public sector banks (PSBs) continued to register subdued performance in credit as well as deposits, whereas private sector banks and foreign banks showed robust growth during the same period.


On the profitability front,  Profit After Tax (PAT) of the scheduled commercial banks declined by 4.4 per cent during the first half of the financial year 2015-16, due to lower growth in earnings before provisions and taxes and higher provisions and write-offs.

In case of public sector banks, PAT declined by 22.7 per cent  whereas, it increased by 11.5 per cent for private banks and 4.6 per cent for foreign banks during the same period.


Not only this, even market share of public sector banks is coming down year after year. It is  estimated that in FY15, PSBs have lost market share by 2 per cent, which has been gained by the private sector banks.

If the current growth trend continues for another three years, by FY18, it is estimated by a rating agency that PSBs share would have come down to 71 per cent ( from 75 per cent in FY15) and the entire gain will be of private banks.

It is however a pleasant information that public banks have got success in recovery of money from defaulters five times of what they used to recover in earlier years.