The advances market share of non-Prompt Corrective Action (non-PCA) Public Sector Banks (PSBs) are expected to be maintained at 50-51% in advances while private sector banks (PVBs) market share is expected to increase from 30.9% (as on March 31, 2018) to 38-40% in the foreseeable future and stabilise at that levels. As per an ICRA note, with the expected resolution under the Insolvency and Bankruptcy Code (IBC), 2016, the asset quality for all PSBs is expected to improve over next couple of years. The improvement in recoveries and the capital infusion by GoI may help PSBs come out of PCA framework and stabilise their market share, though at lower levels of 9-12%. Depending on capital position, PCA PSBs may start posing competition for PVBs from FY2021 onwards restricting the market share gain by PVBs.
According to Anil Gupta, Head, Financial Sector Ratings, ICRA Ltd: “Despite being faced with lingering asset quality concerns, dwindling profitability and capital constraints, the non-PCA PSBs managed to hold on to their market share in advances at around 50-51% for the last two years. The PVBs were able to gain market share in advances to 30.9% as on March 31, 2018 from 25.8% as on June 30, 2016 primarily at the expense of PCA PSBs whose market share declined to 18.6% from 23.3% in above mentioned period.”
Unlike the gain in advances market share, PVBs were unable to gain significant market share in deposits given the strong deposit franchise of PSBs. As against an increase of 5.1% in share of advances for during last 2 years, their increase share in deposits was lower at 3.5%. Within PSBs, non-PCA PSBs held on to their market share at ~52-53%, however, deposit market share of PCA PSBs declined to 21.9% as on March 31, 2018 from 25.1% as on June 30, 2016. PVBs had a high 69% share of incremental deposits during trailing twelve months ending March 31, 2018. This led to a rise in their market share to 25.8% as on March 31, 2018 from 22.3% as on June 30, 2016.
The loss of deposit share for PCA PSBs was also driven by reducing bulk deposits as reflected by an improvement in their current account and savings account (CASA) ratio to 37.6% as on March 31, 2018 from 29.6% as on June 30, 2016. Of this, the savings deposits increased to 31.1% (March 31, 2018) of total deposits from 23.7% (June 30, 2016).
