That state-run banks are in a bad shape is well known. Their overall bad loans, largely loans that have not been repaid for 90 days or more, amounted to ₹8.64 trillion as of December. What is not so well known is that over the last two fiscals, private banks have moved in and captured a large section of Indian banking. Mint takes a detailed look.
1. What is the overall situation with regard to outstanding deposits?
As of 31 March, the total amount of deposits in the Indian banking system was ₹125.6 trillion. Public sector banks had 63.1% of these deposits and private sector banks 28.7%. While public sector banks continue to have the most deposits among the different kinds of banks operating in India, they have lost market share over the years. As of 31 March 2011, when total amount of deposits in the Indian banking system was ₹53.9 trillion, public sector banks had a share of 74.6% in it. The share of private sector banks was a little over 18%. Clearly, private banks have gained at the cost of public sector banks.
2. What is the overall situation with regard to outstanding loans?
As of 31 March, the total amount of loans given out by Indian banks was ₹98.2 trillion. Of this, public sector banks had a market share of 58.8%, while private banks had 33.6%. The situation was different a few years ago. As of 31 March 2011, when the total amount of loans of the Indian banking system was ₹40.8 trillion, public sector banks had a share of 74.9% in it and private sector banks around 17.8%. Private banks have done a lot of catching up in the last few years. They have made full use of the troubles at public sector banks and captured a larger portion of the banking system.
3. What was the situation in 2018-19?
Till now, we have looked at the outstanding deposits and loans of banks. Now we will look at loans given out and deposits raised during a particular year. In 2018-2019, private banks raised deposits worth ₹7.1 trillion, while public sector banks raised ₹2.7 trillion. In 2010-11, public sector banks had raised deposits worth ₹6.4 trillion, while private banks had raised deposits worth ₹1.7 trillion. In 2018-19, private banks gave a total of ₹7.3 trillion in loans, while public sector banks gave₹2.3 trillion in loans. Comparing this to 2010-11, public sector banks had given loans of ₹5.4 trillion and private banks ₹1.4 trillion.
4. Is this phenomenon limited to 2018-19?
No. A similar trend played out in 2017-18. Public sector banks raised deposits of ₹2 trillion against ₹4.3 trillion raised by private banks. In terms of total loans, public sector banks gave out ₹3.4 trillion against ₹4.4 trillion given out by private banks. With regard to loans, a similar phenomenon played out in 2016-17 and 2015-16. Private banks have been capturing a larger segment of banking over the years.
5. What does this tell us about the history of Indian business?
Genuine privatization of government-owned public sector enterprises (like public sector banks are) has rarely happened in India. What has happened is that private companies have taken over many sectors, while government firms have struggled to survive. The telecom and airline sectors are the best examples of this. Banking seems to be going the same way.