Public sector banks (PSBs) saw a mere 0.9% year-on-year (y-o-y) growth in deposits during the quarter ended December 2017, showed data released by the Reserve Bank of India (RBI) on Tuesday. The numbers suggest that PSBs may have lost some ground to their private peers as deposits with private lenders grew 13.5% y-o-y during the same period. Foreign banks recorded positive growth in deposits after four quarters, with their deposits growing 8.4% y-o-y. In terms of credit growth too, PSBs lagged, with a 6% y-o-y growth cosmpared with 23.6% for private banks. The RBI said seven states – Maharashtra, National Capital Territory of Delhi, Tamil Nadu, Karnataka, Uttar Pradesh, Gujarat and West Bengal – accounted for over two-thirds of total deposits and total credit. “The pick-up in credit growth helped in improving the banking system’s credit-deposit (CD) ratio to 75.1% at end-December 2017 from 73.3% a quarter ago,” the central bank said.

The CD ratio for all states and union territories, barring Maharashtra, increased during the quarter. It was more than 100% for Tamil Nadu, Chandigarh, Andhra Pradesh, Maharashtra and Telangana. PSBs have been losing ground to their private peers in recent years as their pile of stressed assets and related provisioning requirements have left them capital starved. It has also cut people’s faith in these banks, thus leading to some erosion in their relatively superior deposit base. PSBs have begun to lose even government business to private players. Private banks gained close to 650 basis points in the government segment and households between FY16 and FY17. “While part of the gain could be temporary, private banks have steadily gained market share in government deposits, which increased to 16% in FY2017 from 5% in FY2012,” Kotak Institutional Equities said.