Private banks grow at faster rate in priority sector lending

A comparison between 17 private sector banks and 27 public sector banks (PSBs) operating in the country shows that private sector banks continue to outperform the state-run banks in priority sector advances growth.

In case of private sector banks, priority sector advances to total advances at the aggregate level showed an increase during 2006-07, compared to 2005-06. In case of PSBs, priority sector advances to total advances showed a decline during the same period. However, the priority sector advances to total advances ratio was higher in PSBs as compared to private sector banks during 2006-07 as well as 2005-06.

The total advances of the 17 private sector banks have increased by 36.3% – from Rs 2,94,382 crore in 2005-06 to Rs 4,01,205 crore in 2006-07. Their total priority sector advances have increased by 40.9% from Rs 89,152 crore to Rs 1,25,593 crore during the study period, thus increasing the priority sector advances to total advances ratio from 30.28% to 31.30%.

On the other hand, PSBs have achieved a growth of 30.2% in total advances, which stood at Rs 14,29,042 crore during 2006-07. The priority sector advances have increased by 25.3% to Rs 4,85,233 crore in 2006-07 from Rs 3,87,312 crore in 2005-06. But the priority sector advances to total advances ratio decreased from 35.28% to 33.96%.

A significant decrease in priority sector advances to total advances ratio was seen in case of PNB. The priority sector advances to total advances of PNB decreased from 45.68% in 2005-06 to 37.81% in 2006-07. The State Bank of India, the largest public sector bank, recorded a marginal decrease in the ratio from 30.56% to 30.24%. Similarly, in case of Bank of Baroda, the ratio declined from 29.36% to 28.76%.

Among the private sector banks, HDFC Bank showed a significant improvement in the ratio. Its priority sector advances to total advances ratio rose from 30.99% in 2005-06 to 37.67% in 2006-07. But ICICI Bank, the largest private sector bank, showed a decline in priority sector advances to total advances ratio in 2006-07, as compared to 2005-06. One interesting thing to be noted is that 29% of private banks showed a decline in priority sector advances to total advances ratio in 2006-07 while 85% of the PSBs showed a decrease in the ratio during the same period.