PRIVATE BANKS’ MARKET SHARE ON THE RISE

With high non-performing assets coupled with weak capitalisation constraining the ability of public sector banks (PSBs) to lend, private sector banks market share in the banking sector advances is expected to increase to 38 per cent – 40 per cent by 2020 from 27.5 per cent as on March 31, 2017.

According to Icra, the private sector banks had an almost 100 per cent share in the incremental bank credit in the trailing twelve months at the end of Q1FY18.

While the banking sector is currently going through a transition, Icra noted that both public and private sector banks are facing different challenges.

“PSBs 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 (GoI) in relation to requirements, PSBs 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,” said Karthik Srinivasan, group head, financial sector ratings, Icra.

Despite these challenges, Icra highlighted that the private sector banks have performed well and capitalised on the opportunities by delivering a credit growth at 3-year CAGR of 17.8 per cent as against 2.5 per cent for PSBs and with relatively better asset quality.