Public sector banks (PSBs) have registered their strongest advance growth since 2010, surpassing private lenders for the first time in over a decade. According to a Systematix Group report cited by news agency ANI, PSBs reported 12.2% year-on-year growth in advances in FY25, compared to 9.5% by private sector banks (PVBs).The report noted that PSBs once held a 74.9% market share in advances back in March 2011, which declined steadily to 51.8% by March 2024. For the first time in 15 years, PSBs’ credit growth reached double digits, marking their fastest expansion since March 2010. The latest growth figures signal a turnaround for public lenders, who are now not only expanding credit faster but are also better placed in terms of liquidity compared to private counterparts, despite deposits trailing advances for three consecutive years.Citing CRISIL estimates, the report said that banking sector advances are expected to grow 11–12% in FY26, supported by Reserve Bank of India’s liquidity measures and government initiatives to stimulate economic growth.On the liabilities side, PSBs retained their deposit market share with only a marginal decline of 56 basis points in FY25, helped by branch expansion after years of consolidation. Household deposits accounted for 67.6% of total deposits at PSBs, compared with 52.1% for private lenders.Systematix also highlighted that the asset quality gap between public and private banks has nearly disappeared. Stronger underwriting practices, aided by technology, and aggressive provisioning have helped PSBs maintain gross slippage ratios at manageable levels.Recoveries from technically written-off accounts further bolstered profitability, contributing between 18% and 22.8% to return on assets for most PSBs, with some lenders recording even higher recovery ratios. The report added that these gains appear sustainable in the medium term, though the pace may moderate.Public lenders have also stepped up efforts to diversify income, increasingly selling insurance, mutual funds and other third-party products. Investments in training and technology are seen as enablers for this shift. Meanwhile, net interest margins have been under pressure due to repo rate cuts, but PSBs limited the decline better than private banks through lower exposure to external benchmark-linked loans and deposit repricing. Margins are expected to stabilise in FY26 with added relief from CRR cuts.The momentum in credit growth and efficiency aligns with the broader vision outlined at PSB Manthan 2025, organised recently by the department of financial services. As per news agency PTI, financial services secretary M Nagaraju said in the event that PSBs have transitioned “from a phase of survival and stability” to becoming “champions of growth, innovation and leadership” in India’s journey towards Viksit Bharat 2047.
