The Hindu Business Line : New private sector banks growing faster than the industry

Mumbai, Dec. 25 The country’s newly licensed private sector banks’ business has, in recent years, grown nearly twice (1.75 times) as fast as that of the banking industry as a whole. This is revealed by an analysis of the data from the RBI publication (Trends and Progress of Banking in India) on deposits and advances mobilised by the industry between 2001-02 and 2006-07.

Growth rate

The banking industry’s business grew from Rs 18.51 lakh crore as of March 2002 to Rs 46.19 lakh crore by March 2007. The annual growth rate calculated on a compounded basis worked out to roughly 20 per cent.

In contrast, the new private sector banks registered a growth of roughly 35 per cent per annum, having grown from Rs 1.64 lakh crore to Rs 7.36 crore during the same period.

The higher growth rate has meant an improvement in market share, which has grown from just nine per cent in 2001-02 to 16 per cent as of March 2006-07. The improvement has come principally at the expense of the State Bank of India and its group of associate banks. The latter has seen its share decline from 28 per cent to 24 per cent during the same period.

Public sector banks

The other public sector banks too have seen a decline of one percentage point. The loss would have been higher but for the positive impact of two factors. One was the conversion of IDBI into a commercial bank and its reverse merger with erstwhile IDBI Bank, which has seen the PSU bank group numbers swell.

The other factor was the merger of a few distressed private sector banks with specific public sector banks during this period. IDBI bagged United Western Bank. The Nedungadi Bank was merged with Punjab National Bank while the Oriental Bank of Commerce took over the banking business of Global Trust Bank during this period.

The older private sector banks have consequently seen their already meagre share (7 per cent) of the market getting further reduced to just 5 per cent by 2007.

The list of foreign banks in the country sporting some of the biggest names in the global industry have just been able to retain their market share at 6 per cent right through this period. The period saw the total number being reduced from 41 in June 2002 to 29 in June 2007.

But this is unlikely to have made any material difference to the market share as all the large banks such as Citibank, Standard Chartered and HSBC have continued to operate right through this period and have seen some expansion in their geographical footprint.