PSU banks gain market share amid slow down in credit growth: UBI Report

ANI June 21, 2025 308 views

Public sector banks have gained market share despite a broader slowdown in credit growth, according to a Union Bank of India report. They outperformed private banks in retail, industrial, and rural lending segments. Regulatory interventions on unsecured loans impacted private banks' disbursements while PSBs strengthened their position. The report highlights PSBs' dominance in rural areas and growing share in urban markets.

"Credit growth slowed in FY25 yet PSBs gained market share vis-a-vis PVBs" – Union Bank of India Report
New Delhi, June 21: The credit growth of Indian banks moderated in the Financial Year 2025, yet Public Sector Banks (PSBs) gained the market share, outperforming their Private Banks (PVBs) counterparts, according to a report by the Union Bank of India.

Key Points

1

PSBs lead in rural and semi-urban credit with 60% share

2

Working capital loans drive PSB outperformance

3

Private banks see sharp drop in fresh disbursements

4

Regulatory curbs on unsecured loans hit private lenders

The report added that the gain was visible across both the nature and geography of lending.

"Credit growth slowed in FY25 yet PSBs gained market share vis-a-vis PVBs," the report added.

The Credit-Deposit (CD) ratio for PVBs was observed elevated, reflecting higher credit push, but their incremental CD ratio corrected sharply in FY25, hinting at a slowdown in fresh disbursements.

Contrary to this, the PSBs saw more stability, leveraging their balance sheets more cautiously but effectively.

As per the report, the working capital and demand loans, typically used by businesses for operational requirements, became a key driver of this outperformance.

The report observed that a major change has emerged in the sectoral distribution of credit. The regulatory interventions on the unsecured lending slowed down retail (especially personal loan) disbursements from private banks.

While the public sector banks used this opportunity to boost their incremental market share in the retail credit segment, especially gaining a lead in the housing loans.

The report observed that the state-controlled banking entities are also leading in industrial credit, which was not the specialisation of PSBs.

On the geographical front, PSBs dominated in rural and semi-urban regions.

Public sector banks secured a large share of incremental credit in rural areas in FY25, re-establishing their presence as key lenders in India's hinterlands. Over 60 per cent of incremental credit in semi-urban locations was cornered by PSBs, while even in urban and metro areas, they managed to claw back some share lost in FY24.

As per the findings of the report in terms of borrower segmentation, credit to individuals continued its upward trajectory in the current fiscal, which shows the strength of retail banking.

Reader Comments

R
Rajesh K.
This is good news for the common man! PSBs have always been more trustworthy with their conservative approach. Private banks were going too aggressive with personal loans and credit cards. RBI's regulations were much needed 👍
P
Priya M.
As someone who recently got a home loan from SBI, I can vouch for this trend. Their rates were more competitive than private banks, and the process was surprisingly smooth. Maybe PSBs are finally getting their digital act together!
A
Amit S.
While this is positive, let's not forget PSBs still have high NPAs. They need to maintain this discipline in lending. Private banks may be slowing down, but their tech and customer service are still miles ahead. PSBs should learn from them.
S
Sunita R.
Rural India still trusts nationalized banks more. My father in our village would never deposit money in a fancy private bank. This report shows PSBs are doing their duty in Bharat, not just India. 🚜
V
Vikram J.
Interesting how industrial credit is shifting to PSBs. Maybe businesses find them more stable partners during uncertain times. But PSBs need to improve their turnaround time - that's where private banks score.
N
Neha T.
The CD ratio analysis is telling! Private banks were overextending themselves. PSBs' cautious approach is paying off. But I hope this doesn't make them complacent - they still need to innovate to stay relevant in the long run.

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Tags:
PSU banks private banks credit growth Union Bank of India banking sector retail loans industrial credit