Indian Banking Sector Consolidation

Indian Banking Sector – Consolidation Continues

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Indian Banking Sector has been through volatile period over last few years. The bad times were majorly for Public Sector Banks. We will see below how has the last 5 years been for the Indian Banking Sector and few top banks in Public Sector Banks and Private Sector Banks list.

In the below analysis, we have focused on top 4 Public Sector Banks and top 4 Private Sector Banks to understand whether the sector is headed for consolidation.

Analysis of Banking Sector in India

Advances of Public Sector and Private Sector Banks

Advances of Public Sector and Private Sector Banks

Overall credit growth in Indian Banking Sector mirrored our GDP growth, with 7.1% CAGR since FY 2014. However, there was high disparity amongst Public Sector Banks and Private Banks, with Public Sector Banks growing their credit at just 3% CAGR, v/s. Private Banks growing at 18%.

Top Public Sector Banks

Top Public Sector Banks

Public Sector Banks have seen consolidation, with top 4 banks accounting for 60% of total Public Sector Bank advances in FY 2019, which used to be ~51% in FY 2014. However, these top Public Sector Banks have lost grounds on their share amongst All Nationalised Banks. Still the top 4 Public Sector Banks account for 39% share, whereas top 4 Private Sector Banks account of ~25% share.

Top Private Sector Banks

Top Private Sector Banks

Top 4 Private Sector Banks were not able to gain market share in the Private Banks segment. Due to Public Sector Banks’ poor credit growth, these top Private Banks have increased their market share from 15% to 25% of all nationalised banks in India.

Deposits of Public Sector and Private Sector Banks

Deposits of Public Sector and Private Sector Banks

Deposits for all nationalised banks has increased at broadly similar to GDP growth rate at ~8%. Private Sector Banks were able to attract higher deposit growth rate.

Public Sector Banks

Public Sector Banks

Public Sector Banks saw consolidation with top 4 banks’ share increasing from 50% to ~58% since FY 2014. Interestingly, these top 4 Public Sector Banks have managed to retain deposits share amongst all nationalised Indian Banks at ~40%.

Private Sector Banks

Private Sector Banks

Private Sector banks in India did not see any major consolidation in deposits towards the top 4 banks, however on all banks level, they gained market share from 13% to 20% of all total deposits.

Cards Business of Indian Banks

Cards Business of Indian Banks

Cards business is where Public Sector Banks have actually delivered at par with their Private Sector counterparts. From March 2014 to September 2019, growth in number of Credit Cards and Debit Cards has remained very identical at ~22% and ~15% respectively for Public Sector Banks and Private Sector Banks.

Private & Public Sector Banks Credit Cards
Private & Public Sector Banks Debit Cards
Private & Public Sector Banks credit to Debit Card Ratio

All Nationalised Banks in India have grown their credit card and debit card count at 20.1% and 14.6% CAGR respectively. Interestingly, many Private Sector Banks in India have grown at a slower rate comparatively. However, these banks already have garnered higher market share in credit card business.

Credit Card Market Share

Credit card market share has been increasing for SBI, Axis Bank and Kotak Mahindra Bank, whereas it is declining for HDFC Bank and ICICI Bank.

When it comes to Debit card market share, SBI has 30 cr debit cards v/s HDFC Bank have 3 cr debit cards, and is further growing at higher rate.

Debit Card Market Share

Employee Count of Indian Banks

Public Sector Banks have added only 50,000 employees since FY 2014, whereas Private Sector Banks have added ~200,000 employees. More can be found on Job Creation In Corporate India – BSE 500 Employee Cost & Employee Count Analysis.

Employee Count of Indian Banks

NPA Provisioning

Public Sector Banks’ provisioning for NPAs is more than their credit growth since FY 2014. More can be found Indian Banking Sector – NPA Mess & The Way Out.

NPA Provisioning

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