Report: Public Sector Banks increase market share amid slower credit growth in FY25; regain lending dominance

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Public Sector Banks (PSBs) gained vital market share throughout lending segments and geographies in FY25 regardless of general moderation in financial institution credit growth, a report by Union Bank of India has revealed. The shift was particularly evident in working capital and demand loans, historically utilized by companies for operational wants, as per information company ANI.“Credit growth slowed in FY25 yet PSBs gained market share vis-à-vis PVBs (Private Banks),” the report famous, including that public sector lenders leveraged their steadiness sheets extra successfully and cautiously, particularly as non-public lenders noticed diminished momentum.The Credit-Deposit (CD) ratio of personal banks, although elevated on account of an earlier credit push, sharply corrected in FY25, indicating a deceleration in recent disbursements. In distinction, PSBs capitalised on regulatory tightening in the unsecured lending area, notably concentrating on retail credit like housing loans, the place they emerged as incremental leaders.The report additionally identified a shift in the sectoral distribution of credit. Private banks, as soon as dominant in retail disbursements, misplaced floor on account of tighter laws, permitting PSBs to step in. Remarkably, state-owned banks additionally posted stronger growth in industrial credit, a phase beforehand dominated by non-public lenders.On the geographic entrance, PSBs noticed robust efficiency in rural and semi-urban areas. Over 60 per cent of incremental credit in semi-urban areas and a major share in rural belts had been secured by public banks. Even in city and metro areas, the place non-public banks historically dominated, PSBs reclaimed some floor misplaced in FY24.In phrases of borrower segmentation, credit to people continued its upward trajectory, signalling sturdy retail banking power, the report mentioned.The report aligns with broader findings launched earlier this month by Boston Consulting Group, which famous that the BFSI sector was present process a interval of average credit growth and profitability stress. The sector’s Net Interest Margins are underneath stress amid repo fee cuts and elevated CD ratios, which have intensified the race for low-cost deposits.Despite this, PSU banks posted a 26 per cent year-on-year growth in revenue after tax (PAT), outperforming non-public banks’ 8 per cent growth. Deposit growth remained wholesome at 11 per cent year-on-year, reaching Rs 229.3 lakh crore, though CASA growth stayed muted.The general banking sector reported a 12 per cent rise in complete internet advances and a 13 per cent increase in mixture credit in FY25, signalling that PSBs’ tactical shift and rural resurgence helped them outperform amid macroeconomic headwinds.