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.
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.
