Private banks to corner 40% advances by 2020
The rising market share of private sector banks in the banking sector advances is expected to jump to 38-40% by FY2020 from 27.5% as on 31 March 31, 2017. According to ICRA, this is after considering the capital constraints of public sector banks and assuming an incremental market share of 80% for private sector banks and a credit growth of 7-9% for the banking sector during FY2018-FY2020. Private sector banks had an almost 100% share in the incremental bank credit in the trailing 12 months (TTM) at the end of Q1FY2018.
Giving details, Karthik Srinivasan, group head, Financial Sector Ratings ICRA, says: “The Indian banking industry is currently going through a transition and private sector banks and public sector banks are facing different challenges. Public sector banks are plagued with asset quality issues leading to higher credit costs and losses. With increasing regulatory capital requirements, weak internal accruals and limited capital infusion by the government of India in relation to requirements, public sector banks have been into capital conservation mode by constraining their lending activities. Private sector banks on the other hand face challenges of increasing competitive intensity because of weak credit demand and the buoyant debt capital markets pose challenges of balancing growth and profitability. Notwithstanding these challenges, private sector banks have performed well and capitalized on the opportunities by delivering a credit growth at 3-year CAGR of 17.8% as against 2.5% for public sector banks and with relatively better asset quality.”