Large public sector lenders such as State Bank of India, Canara Bank, Bank of Baroda and Union Bank of India reported growth of 18-28%, ahead of private lenders including HDFC Bank, ICICI Bank and Axis Bank, which grew in the low-to-mid youth. Analysts attribute the PSBs’ move to improving asset quality, recovery from legacy bad loans and restructuring of corporate debt.
“Many PSBs reported above-system credit expansion and gained around 50 basis points in loan market share during the quarter,” said Pranav Gandlapally, India Finance Director at Bernstein. “Strong credit movements also helped NII growth despite a less favorable funding mix with PSBs, as higher debt-to-deposit ratios offset margin pressures.”
He added that while the difference in deposit growth between PSBs and private banks was small, there was a significant shift in favor. “PSBs delivered strong ROA growth, while most mid-cap private banks faced pressure on profitability,” Gondlapalil said.
Part of the moderation in the private bank’s growth reflects a sharp slowdown in HDFC Bank’s credit expansion during the consolidation of its balance sheet after the merger with HDFC Bank.
In contrast, most PSBs reported above-average credit growth in the December quarter, with large state-owned banks materially outperforming their large private sector counterparts. As a result, PSBs gained almost 50 basis points of loan market share during the quarter, largely at the expense of the top five private banks, even as mid-sized and small private lenders largely held onto their shares, according to an analysis by Bernstein. 55,000 crore in the year,” said Sanjay Agarwal, senior director, CareEdge Ratings. “The gain was supported by higher treasury receipts and recoveries from technically written-off accounts.”
He added that PSBs’ relatively low credit-to-deposit ratio of 81.7% by December 2025 has given them balance sheet headroom to support credit growth. In comparison, private banks grew net profit less than 3.2% in 2019.
Public sector banks
