23-JUN-2025,03 :30PM In a significant shift within India’s banking landscape, private banks have increased their market share in total deposits over the past five years, according to a recent report released by Union Bank of India (UBI). The report reveals that while private sector banks have made notable strides, public sector banks (PSBs) have lost approximately 600 basis points (bps) in deposit share during the same period.
This shift underlines the growing confidence of customers in private banks for savings and fixed deposits, driven by factors such as better customer service, faster digital transformation, and competitive interest rates.
Private Banks Accelerate Growth in Deposit Share
UBI Report Highlights Consistent Gain by Private Sector
According to the Union Bank of India’s comprehensive sectoral analysis, private banks have steadily grown their market share in total bank deposits from around 28% in FY19 to over 34% by FY24. In contrast, the collective share of PSBs dropped from 65% to below 59% during the same period.
This trend reflects changing customer preferences and signals a structural shift in Indian banking dynamics, where private players are rapidly gaining ground in segments traditionally dominated by state-owned banks.
“The shift is structural rather than cyclical. Private banks have invested significantly in technology, customer experience, and outreach, which is now reflected in rising deposit mobilization,” the UBI report states.
Why Private Banks Are Winning the Trust of Depositors
Better Service, Digital Edge, and Innovative Offerings
Private banks have long been regarded as more agile and service-oriented compared to their public sector counterparts. The UBI report credits the increase in deposit share to several strategic advantages held by private lenders:
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Enhanced digital infrastructure that simplifies banking for tech-savvy customers
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Personalized customer support and faster grievance redressal
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Attractive fixed deposit schemes and interest rates
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Greater focus on urban and semi-urban markets
Institutions like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank have consistently expanded their branch and ATM networks, while also offering seamless mobile and internet banking experiences.
These efforts have clearly resonated with depositors, especially younger, urban customers and small businesses, who value speed, flexibility, and digital convenience.
Public Sector Banks Lose Ground Amid Structural Challenges
Legacy Systems and Limited Agility Hold PSBs Back
While private banks have surged ahead, public sector banks continue to grapple with legacy systems, bureaucratic inertia, and regulatory constraints that limit their competitiveness. According to the UBI report, this has hindered their ability to keep pace with the evolving expectations of India’s increasingly digital-first population.
Additionally, issues such as high Non-Performing Assets (NPAs), frequent leadership changes, and slower rollout of tech upgrades have further eroded public confidence in some PSBs.
“Many PSBs still rely heavily on traditional brick-and-mortar models, which are losing relevance in the age of digital banking,” the report adds.
However, not all PSBs are lagging. Banks like State Bank of India (SBI) have continued to modernize aggressively, although their sheer size means market share changes occur more slowly.
Private Banks Lead Urban Deposit Mobilization
Targeting High-Value Customers in Metros and Tier-1 Cities
A deeper dive into the data reveals that private banks have focused on urban and affluent segments, where deposits tend to be larger, more stable, and digitally accessible. Their aggressive marketing campaigns and tailored financial products for professionals, startups, and MSMEs have allowed them to tap into emerging high-growth deposit segments.
Furthermore, private lenders have made significant inroads in offering salary accounts, corporate banking, and premium savings schemes, further consolidating their position in India’s top-tier financial hubs like Mumbai, Delhi, Bengaluru, and Hyderabad.
What This Means for the Indian Banking Sector
Healthy Competition Driving Better Services
The increasing market share of private banks should not be seen as a threat but rather as a positive sign of competitive evolution in India’s financial ecosystem. Analysts believe this trend will compel public sector banks to accelerate reforms, adopt technology more aggressively, and invest in improving customer engagement.
“Competition will drive better products, more transparency, and faster adoption of financial innovation across the sector,” noted financial analyst Ankit Mehra.
From a policy perspective, the Reserve Bank of India (RBI) has also encouraged healthy competition while ensuring stability, and this deposit shift underscores the broader financial inclusion and modernization underway in India.
Future Outlook: Private Banks to Continue Gaining Ground
Digital Banking Boom Favors Private Sector Expansion
With the government’s continued push towards Digital India, and increasing smartphone penetration even in rural areas, private banks are well-positioned to continue growing their deposit base. Their agility in adopting new fintech trends such as AI-driven banking, UPI innovation, and paperless KYC processes gives them a distinct edge.
UBI’s report forecasts that private banks could potentially gain another 400–500 bps in deposit market share over the next five years, especially if public sector banks do not catch up with modernization efforts.
However, industry experts caution that private lenders will also need to guard against overexposure, ensure compliance, and maintain strong balance sheets to retain depositor trust in the long term.
Conclusion: A Clear Signal of Changing Preferences
The UBI report offers a clear picture of evolving depositor behavior in India. Private banks are not only catching up but in many areas surpassing their public sector counterparts, especially in urban deposits, tech-enabled banking, and customer experience.
While public sector banks remain vital to India’s financial architecture—especially in rural and priority sectors—the rapid rise of private players reflects a broader desire for efficient, digital, and customer-centric banking solutions.
As private banks continue to innovate and expand, their growing market share in total deposits marks a significant milestone in India’s journey towards a modern, inclusive, and competitive banking system.
Souce : ANI
