PSB credit growth: public lenders surpass private colleagues for the first time since 2010; Gap of asset quality narrower – The Times of India

Public Sector Banks (PSBs) have registered their strongest advance growth since 2010 and surpassed private lenders for the first time in more than ten years. According to a Systematix Group report quoted by Ani news agency, PSBs reported a growth of 12.2% on an annual basis in the progress in FY25, compared to 9.5% by banks in the private sector (PVBS).The report noted that PSBS once had a market share of 74.9% in March 2011, which steadily fell to 51.8% in March 2024. For the first time in 15 years, the credit growth of PSB’s reached double digits, which marked their fastest expansion since March 2010. The newest growth figures point to a change for public lenders, who now not only expand credit faster, but are also better placed in terms of liquidity compared to private counterparts, despite the deposits that bind hesitons for three consecutive years.With reference to the crisil estimates, the report said that the progress of the banking sector is expected to grow by 11-12% in FY26, supported by the liquidity measures of Reserve Bank of India and government initiatives to stimulate economic growth.On the liability side, PSBs retained their market share with only a marginal decline of 56 basic points in FY25, helped by the expansion of branches after years of consolidation. Deposits of households accounted for 67.6% of the total deposits at PSBs, compared to 52.1% for private lenders.Systematix also emphasized that the gap between activa quality between public and private banks has almost disappeared. Stronger insurance technical practices, helped by technology and aggressive facilities have helped PSBs to maintain gross slip ratios at manageable levels.Recovery of technically written off accounts further strengthened profitability, and contribute between 18% and 22.8% to returning assets for most PSBs, with some lenders registering even higher recovery ratios. The report added that these profits appear sustainable in the medium term, although the pace can moderate.Public lenders have also increased efforts to diversify income, increasingly the sale of insurance, investment funds and other third -party products. Investments in training and technology are seen as enablers for this shift. In the meantime, the net interest rate margins have been under pressure as a result of reducing the repo rate, but PSBs limited the decrease better than private banks due to lower exposure to external benchmark-linked loans and deposito herhals. Margins are expected to stabilize themselves in FY26 with extra lighting of CRR cuts.The momentum in credit growth and efficiency is in line with the broader vision set out on PSB Manthan 2025, recently organized by the Department of Financial Services. According to PTI news agency, Minister of Financial Services M Nagaraju said in the event that PSBs “from a phase of survival and stability” have been transferred to “Champions of Growth, Innovation and Leadership” in the journey from India to Viksit Bharat 2047.