Banking sector in India is now witnessing a major change and ushering a new era. Traditionally on an overall basis Indians generally trust Public Sector Banks with their bank accounts while the new generation private sector banks dominate the market in urban areas. Today I shall share my views with some data about Indian Private sector banks.
The scenario is now changing fast . More and more people are coming towards these private sector banks. Over this two-year period, seven private sector lenders improved their market share in terms of deposits. These were HDFC Bank, Axis Bank, ICICI Bank, Yes Bank, Kotak Mahindra Bank, IndusInd Bank and Federal Bank. In contrast, all PSU banks lost deposit market share. While all the PSU banks are suffering from very poor non performing assets the private sector banks are taking cautious steps and only increasing exposure to better quality credit. Public sector banks that exhibit progressively deteriorating capital ratios fall under the Prompt Corrective Action framework. It is a framework under which banks with weak financial metrics are put under watch by the Reserve Bank of India to assess , monitor and control the Banks. Except SBI all other PSU Banks are showing poor performence in their asset quality, capital, profitibality and leverage. This PCA framework was introduced by the RBI in 2002 as a structured early intervention mechanism and several times it was revised and amended. Recently to rescue the banks namely Vijaya Bank and Dena Bank merging has been allowed and executed with the Bank of Baroda. This merging is not only done to minimise the NPA issue it has other facets also i.e. to mitigate the number of public sector banks in the nation. After amalgamation the number of PSU bank is nineteen.
Now we look the year when the new tech savy private sector banks came into the picture. In the year 1990 came ICICI Bank, in 1993 axis Bank, HDFC and Indusind Bank appeared in 1994, Kotak Mahindra Bank in 2001, yes Bank in 2004 and IDFC & Bandhan Bank in only 2015.
After taking part in Indian economy these private banks are doing very well and continuing their business. These have a great future as India is world's second biggest market for banking business after China.
In terms of garnering low-cost CASA (current and savings accounts) deposits, the private sector banks clearly are doing a better job. Between FY16 to FY18 while 39 listed banks on the whole have grown their CASA at a CAGR (compounded annual growth rate) of about 19 percent, private sector banks have grown their CASA by over 25 percent.
And on the advances side the market is again dominated by the private banks. The situation if IDBI bank is also very bad with poor NPA which was finally taken over by the cash rich Life Insurance Corporation of India .
On the other hand private sector banks are adequately capitalized and they are again trying to raise more capital through bond market or any other way for their expansion.
So investing on these private sector banks are better option.
Thanking you and expecting your comments...