Private banks loan book likely to grow at 24% till FY'19
Advances of Indian private banks are expected to grow at a compound annual growth rate (CAGR) of 24% till FY19, almost double than the projected growth rate of public sector banks over the same period, a study has said. According to ASSOCHAM-Crisil study, credit growth of the Indian banking sector is expected to remain subdued at about 11% in the current fiscal due to demand slump from the corporate sector. But, private banks are expected to play an important role in banking sector’s growth over the medium term, “given their strong balance sheet, large presence in the retail segment and strong, low-cost liability franchise”. The near-term growth for the private sector banks will be driven by retail, agriculture, small and medium segments. On the other hand, the study said that public sector banks will be forced to focus on reorienting their business model to become more competitive. PSBs will “need to increase focus on improving their performance in lieu of chasing growth”, it added. Besides, the report also suggested PSBs to focus on improving governance and building better customer connects. “PSBs will face tough competition from private sector banks in the low yield segment like mortgage, auto and from non-banking finance companies (NBFC) in high yield segment like loans against property, used vehicle, personal loan, gold loans etc.” it said. At present, public sector banks hold over 74% of the system, while private sector accounts for 22% and foreign banks for the rest. However, the share of private banks has increased from about 18% during the past five years. During the last five financial years from FY2010 to FY2015, private banks have grown at a CAGR of 20%, compared to 16% CAGR clocked by PSBs.
January 20, 2016 | 03:55pm IST
to success.