Private Banks are growing faster in EVERY state

Private sector banks are growing faster than public sector banks. In the last 5 years (FY15-20), aggregate deposits of Private sector Banks have grown by 18% Cagr. In contrast deposits of PSU Banks have grown at 6% Cagr. That is a massive difference in growth rate.

Worth noting is that this difference in growth rate exists across all states. It is not the case that Private sector banks are growing deposits in the richer states while the public sector banks continue their dominant position in the poorer states. In every single state, deposits of Private sector banks have grown faster than Private sector banks.

Indeed, in several of the poorer states, the gap between the respective growth rates is higher than all India average. In Madhya Pradesh for instance, deposits of Private banks have grown 20ppt faster than PSU banks. In Tripura, deposits of Private banks have grown 23ppt faster than PSU banks. For reference, in aggregate deposits of Private banks have grown 12ppt faster than PSU banks. Assuming the recent growth trajectory sustains (growth rate during FY15-20), Private banks’ share in deposits will rise from 30% in FY20 to over 40% in FY25.

Despite this robust growth in the last few years, in several of the poorer states, Private banks have a long room to grow. In Madhya Pradesh for instance, Private banks have a 15% share in total deposits, half the all-India average. In Tripura, Private banks have just an 8% share of deposits, less than a third of the all-India average. On the other end, Kerala and Haryana have the highest penetration by Private banks with over 40% share in deposits. J&K is an outlier with a 70% share of private banks, largely due to the Jammu and Kashmir bank, a private bank, enjoying a de-facto state bank status.