Public Sector Banks Outperforming Private Lenders Amid Strategic Shifts
Public Sector Banks (PSBs) outpaced Private Sector Banks (PVBs) with higher credit growth in Q1FY26. PSBs saw an 11% growth, though only three reported a rise in net advances. A strategic focus on profitability affected loan growth. A shift towards term deposits shaped funding challenges.
- Country:
- India
In a striking development, Public Sector Banks (PSBs) have outperformed their Private Sector counterparts (PVBs) with a notable 11% credit growth compared to PVBs' 8.1% in the first quarter of the financial year, a CareEdge report reveals. Only three of the seven PSBs saw growth in net advances, driven by increased retail, agriculture, and MSME lending.
The remaining four PSBs opted to prioritize profitability over loan expansion. Scheduled Commercial Banks (SCBs) reported a dip in Net Interest Income (NII) growth to 4.1%, a significant drop from the previous year's 12.7%. Interest expenses rose amid steep term deposit growth, notably affecting PSBs.
Despite liquidity, attracting CASA deposits proved challenging, leading to a dip in their proportion. Looking ahead to Q2FY26, potential growth is highlighted across rural markets, agriculture, and MSMEs. Increased urban retail demand is anticipated with the festive season, alongside impacts from recent repo rate cuts and ongoing deposit repricing.
(With inputs from agencies.)
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