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Indian States Banking Barometer series #4: Gujarat

In this series of Indian States Banking Barometer, we deep-dive into one of the leading and dominant Gujarat (GJ) market, which commands 5% share in bank credit / deposit. Distinct characteristics of the state include: i) Credit-heavy market with private banks/SFBs C/D ratio at >100%. However, PSU banks and SBI pull state average down to 79%; ii) GVA is largely led by industry and manufacturing, and state credit to GDP remains lower at ~39%. iii) Industry and retail loans contribute majorly to state credit; private banks are dominant in retail loans (housing & credit card in particular). iv) Share of small loans in state credit is ~5% vs national average of 9%. v) HDFC and Axis not only are more prominent in GJ but also have significantly gained market share. vi) Gujarat has granular deposit base as reflected in higher share of household & NR deposits at 83%. TD average ticket-size is significantly lower than national average.

* Gujarat (GJ) is a credit heavy market but player-wise divergence persists: GJ is a credit-dominated market: i) Private banks’ credit to deposit (C/D) ratio is >100%; however, SBI and PSU banks pull down state average to ~79% (vs 81% pan-India), ii) credit to GDP ratio of average 41% (FY15-FY19) vs national average of 53% as GVA is largely driven by manufacturing & industry while services contribution is much lower. Industry (construction, textiles, metals, engineering, vehicles) and retail credit contribute majorly to state credit. Private banks are dominant in retail loans (housing and credit card in particular). Credit is primarily concentrated in metros while vehicle, transport operators and retail loans dominate urban areas. Share of small loans in overall state credit is mere 5% vs the system average of 9%.

* Bank-wise positioning. Broadly, private banks dominate credit market with 46% share in state’s credit vs 34% share at system level. SBI, DCB and RBL’s presence is more prominent in rural & semi-urban areas. Kotak, IIB, KVB and CUBK appear to be more metro-focused. HDFC and Axis are relatively more balanced across regions. SFBs dominate the urban market; leading banks are selectively present in urban areas. HDFC and Axis not only are more prominent in credit and deposits but also have significantly gained market share. Kotak, IIB and AU SFB too have improved market positioning. RBL, YES and FB are ramping up steadily, and SFBs are still at a nascent stage. FB, Bandhan (with Gruh merger), CUBK and Ujjivan appear to be more credit focused (C/D ratio at >200%) while HDFCB, IIB and Kotak are approaching it in a balanced manner. Axis appears to be relatively more creditfocused with C/D ratio at >160%. For SFBs, except Equitas, the state is clearly a credit market.

* Most granular deposit profile: Gujarat has granular deposit base reflected in higher share of household & NR deposits at 83%. TD average ticket-size is significantly lower than national average while SA ticket size is higher especially for private and foreign banks. Relatively higher TD mobilisation is witnessed in rural and semi-urban areas; metros have higher share of SA deposits than national average. Out of top-5 cities, Ahmedabad and Surat are credit markets with >100% CD ratio while Vadodara and Gandhinagar are deposit markets (CD ratio at ~50%) and Rajkot is balance market with CD ratio at 84% as on June’21.

* Player-wise asset quality: State GNPL ratio as on June’21 stood at 6%. Surprisingly, SME-focused players like CUBK, KVB and Equitas are the only ones having >6% GNPL ratio; rest are below state average.

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