Market share gap between large and mid-sized banks to grow

The gap in market share between large private banks and their mid-sized peers is likely to widen going ahead, as various mid-sized banks are saddled with legacy issues, which have hindered their ability to grow incremental market share, say experts.

“If you look at the large private banks, they are definitely doing well in terms of loan book growth and increasing their market share,” Anil Gupta, senior vice president, co-group head, financial sector ratings, ICRA, said. “But, there has been a challenge among mid-sized banks to raise their liability (franchise) and increase their market share. Over the last five years, if you leave aside the top four banks, the market share of all other banks has remained the same.”

To put things in perspective, the advances market share of ICICI Bank, HDFC Bank, Axis Bank and Kotak Mahindra Bank rose to 73% in June 2022 from 68.5% in March 2016, data from ICRA showed. Similarly, deposit market share of these four banks grew to 72.5% in June 2022 from 68.1% in March 2018.

While mid-sized lenders like YES Bank had begun to gain market share at a rapid pace, they came under the Reserve Bank of India’s (RBI) scanner and this put a halt to their ascent, say analysts.

In March 2020, RBI imposed a 30-day moratorium on YES Bank and superseded its board of directors after it had unearthed certain corporate governance lapses at the bank. In fact, YES Bank had seen a significant rise in bad loans in the years leading to the central bank’s move.