The Finance Ministry wants public sector bank (PSB) chiefs to put their shoulders to the wheel to stem market share loss in the so-called ‘RAM’ (retail, agriculture and MSME) loans segment and deposits.

The market share loss comes in view of private sector banks (PVBs) upping their game on both sides of the balance sheet - assets and liabilities.

The ministry brass, in a meeting with top PSB chiefs on March 25, specifically flagged the issue of state-owned banks losing market share across the RAM segment, especially MSME and retail.

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Further, they noted that PSBs have been losing market share consistently in deposits, including low-cost Current Account, Savings Account (CASA) deposits.

In an earlier meeting (on August 30, 2022), too, the Ministry had emphasised that PSBs need to regain market share in credit they lost to PVBs, amid a pick-up in credit in the banking system. Now, it also wants these banks to focus on improving market share in deposits.

Credit: declining market share

As at March-end 2022, the PSBs’ market share in the MSME (Micro, Small and Medium Enterprise), retail and agriculture segments declined to 48.1 per cent (from 60.1 per cent as at March-end 2019), 55 per cent (58.9 per cent), and 67.2 per cent (72.2 per cent), respectively.

The market share loss in the corporate segment was relatively lower at 57.9 per cent (59 per cent), according to data presented at the meeting.

Overall, PSBs’ market share in credit dropped to about 58 per cent as of March-end 2022, against 62 per cent as of March-end 2019.

PSB chiefs roll up their sleeves

However, in a clear sign that PSB chiefs have picked up the gauntlet, state-owned banks’ credit growth outpaced industry -- Scheduled Commercial Banks’ (SCBs) -- growth, retaining their market share at 58 per cent.

PSBs’ credit grew 17.2 per cent vis-a-vis SCBs’ growth of 17 per cent as of December-end 2022.

Deposits: need to regain market share

PSBs’ market share in deposits dropped to about 62 per cent as at March-end 2022, against 66 per cent as at March-end 2019.

However, as at December-end 2022, thanks to deposit rate hikes, state-owned banks caught up with industry -- Scheduled Commercial Banks’ (SCBs) -- retaining their market share at 62 per cent.

PSBs’ deposits grew 9.9 per cent vis-a-vis SCBs’ deposit growth of 10 per cent as at December-end 2022.

The importance of end-to-end customer lifecycle (acquisition, deepening, and retention) to ensure stickiness in deposits and secure a higher market share was emphasised at the meeting.