Business growth: private banks outpace public sector peers

Icra report said YTD loan growth (December quarter) was 7.16% for PSU banks while it was 15.08% for private banks

At the time when overall credit and deposit seems to missing the projected level by Reserve Bank of India (RBI) it has been observed that the loan growth and deposit growth in the private sector banks is satisfactory while the poor performance by their public sector peers is dragging the  industry growth on year to date (Y-T-D) basis. Public sector banks controls about 70% of the country’s banking industry.

Rating agency Icra in its report said YTD loan growth (December quarter) was 7.16% for the public sector banks while it was 15.08% for the private banks.

There rate of deceleration in credit growth is more in industries like textiles, iron and steel, gems and jewellery, construction and infrastructure Icra said. Within infrastructure, power and telecommunications have witnessed significant deceleration since April 2011, it added.

The sharp deceleration in the above industries is partly on account of risk aversion by the banks as significant portion of restructured accounts came from these sectors.

On deposit growth as well private sector players were able to mobilise more deposits than public sector banks it said.

Y-T-D growth of deposits for PSBs was 6.78% while for private sector banks it was 13.96%. The deceleration in term deposits is mainly on account of unattractiveness of term deposits due to low real interest rates Icra added.

The rising gap between deposits and credit growth has resulted into liquidity crunch in the banking sector with bank borrowing through the LAF corridor rising from around Rs 52,000 crore level in September 2012 to around Rs.1,23,100 crore level in December 2012.