PSBs’ share in credit market dips 19% in 10 yrs

The Reserve Bank of India (RBI), in its latest report on scheduled commercial banks in India, has said the public sector banks' (PSBs) share in the total bank credit has continued to decline, while private banks posted robust growth.

In its report, ‘Basic Statistical Return on Credit by Scheduled Commercial Banks (SCBs) in India – March 2022’, the central bank says PSBs’ share in the total credit by the country’s commercial banks stood at 54.8% as of March 2022 as compared with 65.8% five years ago and 74.2% 10 years ago.

At the same time, the share of private sector banks nearly doubled to 36.9% over the last 10 years.

While all the bank groups recorded robust credit growth during 2021-22, bank branches in urban, semi-urban, and rural areas maintained double-digit annual (y-o-y) growth in credit in March 2022. According to the RBI, credit growth for metropolitan branches also increased significantly to 9.2% from 1.4% in the previous year.

But the RBI findings show the share of metropolitan branches is sliding. Over the past five years, the credit shares of rural, semi-urban and urban units have gone up at the cost of metropolitan branches of banks, which still accounted for nearly 60% of the total bank credit in March 2022 (65.2% five years ago).

Maharashtra tops the chart when it comes to high credit disbursement by banks. Maharashtra (26.2 per cent), the national capital territory of Delhi (11.3% ), Tamil Nadu (9.2%) and Karnataka (6.8%) together accounted for over half of the credit extended by scheduled commercial banks.

Among the key sectors, agriculture credit is higher than industrial credit. The agriculture credit grew at 12.2% YoY in March 2022; loans to the industrial sector recorded 4.7% growth in 2021-22 after witnessing a decline in the previous year.

Interestingly, over the past decade, the share of industrial loans in the total credit has been gradually declining whereas, the share of personal loans has been increasing. This has resulted in both categories having nearly 27% credit share each in March 2022.

As credit demand from the retail segment has become more distinct in recent years, the portion of small-sized loans is also going up steadily.

The share of loans up to ₹1 crore has surged to nearly 48% in March 2022 from around 39% five years ago, whereas the share of loans above ₹10 crore fell to nearly 40% from around 49% over the same period, notwithstanding the price effect on loan-size over time.

High growth has been seen in loans under the 7% interest rate bracket. The share of loans bearing less than 7% interest rate rose to 23.6% in March 2022 compared to 15.1% a year ago. Nearly 95% of the loans were utilised in the states or union territories where they were sanctioned.