Public Sector Banks Borrow More to Fund Credit Growth as Deposits Lag
· Business · Economic Times
Public sector banks in Mumbai are increasingly relying on borrowings to fund lending expansion because deposit growth is failing to keep pace. Borrowings by public sector banks surged nearly 29% year-on-year in the June quarter, contrasting with a growth of about 3% at private lenders. Meanwhile, private banks expanded their deposits by 14.3% year-on-year in the quarter, outpacing the 10.7% growth recorded by PSU banks and allowing them to gain market share. Bernstein analyst Pranav Gundlapalle notes that this continued reliance on borrowings could act as a drag on net interest margins relative to private banks. Abundant system liquidity and softer wholesale funding rates are currently cushioning the financial impact of these shifts.
Why it matters
State-owned lenders face potential erosion of their traditional funding and liquidity advantage over private banks, which could weigh on their net interest margins.
Read the original report — Economic Times
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