PSU banks lose biz to private sector peers

Private sector domestic banks have wrested market share from their public sector peers in the country, says an UNCTAD report.

Private sector domestic banks have wrested market share from their public sector peers in the country, while foreign banks have managed to hold their turf between 1994-95 and 2006-07, an UNCTAD report has said.

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Though public sector banks still hold the major chunk of the market, the private sector banks are increasing their share. The private banks ramped up their share to 23.4 per cent in 2006-07 from 8.9 per cent in 1994-95. The share of PSU banks fell to 69.2 per cent in 2006-07 from 83.8 per cent during the period, said Trade and Development Report, 2008 of the United Nations Conference on Trade and Development (UNCTAD).

Market share of foreign banks, however, remained almost stagnant during the period. Their holding marginally changed from 7.3 per cent to 7.4 per cent for the period under review.

In a bid to bring in greater efficiency, the Reserve Bank of India (RBI) allowed entry of new private sector banks. In January 1993, norms for entry of new private players were announced.

Following the financial sector reforms, entry of private players in the banking sector gave rise to competition. Players like ICICI Bank and HDFC Bank with the help of technology expanded their business rapidly.