FM tells PSBs to take steps to improve deposit base as govt owned banks lose market share

In the recently concluded meeting of the Finance Minister with government owned banks, Nirmala Sitharaman has advised public sector banks to step up action on garnering deposits.

As per sources, except for SBI, which has improved its market share for deposits  between FY18 and FY23 and Bank of Maharashtra which has held on to its market share in the past 5 years, rest of the govt owned banks have slipped. PNB is the most significant loser of deposits share in the last 4 years , followed by BoI, Union Bank and Canara Bank, among others.

Sources say, PSBs share of CASA (current account, savings account) too has slipped from 65 percent in 2018 to 57 percent in 2023. Government has also flagged losing market share in advances as a challenge for PSBs , their share is down from over 66 percent to below 59 percent in the past 5 years. In FY23, PSBs also faced lower operating profit of around 2 percent per asset compared to 3 percent clocked by their private peers.

Not just this, the reverse merger of HDFC with HDFC Bank has also been flagged as a challenge. Sources say the merger is expected to deepen the fight for market share in deposits and retail loans, particularly when public sector banks have steadily slipped on the deposit front.

As a way forward , govt owned banks have been advised to expand current accounts and salary accounts with efficient digital channels to increase the reach and ease of customers. Also , proper risk management systems should be in place for financing assets which are riskier in nature.