Public sector banks (PSBs) have lost 770 basis points (bps) market share in deposits since FY2011, with the loss gradually picking pace in the past few years.

PSBs lost 250 bps market share in FY2018 alone, according to a Kotak Securities report. However, the loss in branch share is far less at 450 bps since FY2011 and 200 bps in FY2018. Hundred bps equals one percentage point.

“This demonstrates superior performance by private banks, and partly reflects strong growth in loans for private banks, which requires them to focus more on deposits.

“This can be compared to most public banks, which were under the PCA (prompt corrective action) framework that also restricted them to lend, leading to lower focus on deposit mobilisation,” said the report.

Private banks maintained a strong momentum on gains in deposit share, largely at the expense of PSBs, a trend that Kotak Securities analysts, MB Mahesh, Nischint Chawathe, Dipanjan Ghosh and Shrey Singh, see in all deposit products and across geographies.

“FY2018 witnessed balanced growth in productivity across branches and geographies. Branch expansion moderated after years of rapid growth. Private banks continued to gain market share across geographies, while PSBs faced severe pressure with a drop in market share of deposits and loans across all regions,” they said.

Investment in branch expansion slowed in recent years to 3.4 per cent year-on-year (y-o-y) in FY2016 and 4 per cent in FY2017 and 1 per cent in FY2018.

“We believe the slowdown in branch count is on the back of rising concerns over profitability of banks as credit cost remains high as of FY2018. Under such circumstances, investment in branch infrastructure, which has a comparatively longer pay-off period, is challenging.

“Additionally, branch expansion would remain muted going ahead, as banks have increasingly started to focus on digital channels to acquire customers,” the analysts said.

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