IGI Logo

Indian States Banking Barometer Series #2: West Bengal

In this series of Indian States Banking Barometer, we deep-dive into the West Bengal (WB) market, which commands 4% / 6% share in credit / deposits, respectively. Few distinct characteristics of the state: i) Not a credit-led market - state credit to GDP at ~42-43% (vs 53% pan-India level) and sub-5% credit growth over the past 5 years; ii) micro and SME lending dominate with few private banks controlling the space; iii) more deposit-centric market, reflected in mere 52% C/D ratio (leading private banks have less than 80% and SBI at 34%); PSU banks dominate deposit market, though they are losing market share.

Only a few private banks are actively chasing deposits; and iv) credit and deposit have concentrated in just the top 3 cities (60-65%); SBI, Bandhan are dominant in rural/semi urban areas; Kotak is more focused in metros, while HDFC & Axis have a more balanced branch distribution.

* West Bengal (WB) – More deposit-centric market than being credit driven:

WB, we would say, is relatively a deposit-centric market as reflected in i) low credit to deposit (C/D) ratio at ~52% vs pan-India C/D ratio of 76% - leading private banks have <80% CD ratio and SBI’s CD ratio is mere 34%, ii) state credit to GDP ratio at mere 42-43% (FY15-FY19) vs 53% at pan-India level; iii) states share in pan-India credit at 4% vs deposit share at 6%. Average credit growth in the state has been sub-5% over the past 5 years. Also, with industry and manufacturing share relatively lower in the state GDP, the credit too is concentrated around small-ticket loans and is more granular. Share of small-ticket loans in total credit is as high as 13% compared to 9% at pan-India level.

* Micro and SME lending focused private banks dominate:

Private banks have a significantly higher share in small-ticket loans (~11% of total state credit) at 53% (dominated by Bandhan) and are more active in personal and agri lending. Bandhan, IndusInd and RBL have relatively higher share of credit in WB compared to pan-India market share – Axis too is catching up. Except these micro lending focused banks, none of the other banks have credit share in WB of more than pan-India market share. Players have created dominance in MSME sub-segments; Bandhan dominates in micro loans, Axis, IIB & RBL are catering to micro & small enterprises; HDFC Bank, Kotak & Federal Bank are tapping in small & medium-sized markets. SBI has a mere 15% market share in WB, other PSU banks are at 45% - both (SBI & PSBs) of them have lost share (5% and 13%, respectively) to private banks. PSU banks are more concentrated in industry, housing segments.

* PSU banks dominate deposit market, though they are losing market share; only a few private banks are actively chasing deposits:

Compared to credit, West Bengal commands relatively higher share of deposits – 6% pan-India. PSU banks clearly dominate with 70-72% market share in the state (SBI at 24-25% and other PSU banks at 46-48%). Private bank deposit share in WB lags their pan-India average – in fact private bank’s share is mere 21-23% in SA and TD, respectively, compared to their share in pan-India deposits at 26-29%. Deposits too are granular with 77% flowing from household sector and average ticket size too is lower by 20-25%.

* SBI, Bandhan dominant in rural areas; HDFC & Axis have diversified presence, while Kotak is more focused in metros:

In WB, the top three cities (Kolkata, 24 Pgs North, 24 Pgs South) constitute 60-65% of deposit and credit market. However, their presence (branches) is relatively higher than pan-India average in rural and urban areas than metros. Branch penetration is higher in rural areas dominated by SBI and Bandhan. Comparatively, HDFC, Axis, Kotak are more focused in metros & urban markets.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer