Large state-run lenders such as State Bank of India, Canara Bank, Bank of Baroda and Union Bank of India reported advances in growth of 18-28%, ahead of private lenders including HDFC Bank, ICICI Bank and Axis Bank, which posted growth in the low-to-mid teens. Analysts attribute the momentum at PSBs to improving asset quality, recoveries from legacy bad loans and a revival in corporate lending.
“Most PSBs reported above-system credit expansion and gained around 50 basis points of loan market share during the quarter,” said Pranav Gundlapalle, head of India Financials at Bernstein. “Stronger credit momentum also helped PSBs edge ahead in NII growth despite a less favourable funding mix, as higher loan-to-deposit ratios offset margin pressures.”
He added that while deposit growth differentials between PSBs and private banks remained narrow, the more notable shift was in profitability. “PSBs delivered stronger RoA expansion, while several mid-sized private banks faced profitability pressures,” Gundlapalle said.
Part of the moderation in private bank growth reflects the sharp slowdown in HDFC Bank’s loan expansion amid its ongoing balance sheet realignment following the merger with HDFC Ltd. ICICI Bank’s growth has also normalised in recent quarters, tracking closer to or slightly below system averages.
In contrast, most PSBs reported above-system credit growth in the December quarter, with large state-run banks materially outperforming their large private sector peers. As a result, PSBs gained roughly 50 basis points of loan market share during the quarter, largely at the expense of the top five private banks, even as mid-sized and smaller private lenders broadly held on to their shares, as per an analysis by Bernstein.”PSBs continued to exhibit robust performance in the December quarter, with net profit rising 17.5% year-on-year to ‘55,000 crore,” said Sanjay Agarwal, senior director at CareEdge Ratings. “Profitability was supported by higher treasury gains and recoveries from technically written-off accounts.”
He added that PSBs’ relatively lower credit-to-deposit ratio of 81.7% as of December 2025 has given them greater balance sheet headroom to support credit growth. In comparison, private banks reported modest net profit growth of 3.2% YoY.