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Indian States Banking Barometer series #3: Maharashtra

In this series of Indian States Banking Barometer, we deep-dive into the leading and dominant Maharashtra (MH) market, which commands 26% / 20% share in bank credit / deposit, respectively. Distinct characteristics of the state include: i) Actively banked market with state credit to GDP at ~84% and C/D ratio at 81%. ii) Industry and financial institution credit constitutes majorly to the state credit led by PSU banks; private banks are dominant in retail loans (credit card in particular). iii) Metro market dominates with 89% share of total state credit.

iv) Market is expanding beyond Mumbai city, which registered muted credit / deposit growth (FY16-June’21) of 1% / 4% respectively vs 10%+ growth in Mumbai suburbs, Pune, Thane and Nagpur. v) CA deposits and TD dominate in MH while SA deposit share is significantly lower than the pan-India average. vi) SBI, HDFCB, Bandhan and SFBs have ~45-55% of branches located in rural and semiurban markets; Axis, Kotak, IIB appear more metro focused while DCB and Ujjivan are more prominent in metros; SFBs dominate the urban market. vii) Federal, Bandhan, and RBL are dominant in credit while HDFCB, IIB and SFBs appear to focus relatively more on deposits. SBI, Axis, Kotak have a balanced business presence.

* Maharashtra (MH), a credit-dominated market: MH has been a credit-dominant market as reflected in: i) credit to deposit (C/D) ratio at ~81% vs 71% pan-India, ii) credit to GDP ratio of 84% (FY15-FY19) vs national average of 53%. Industry (construction, textiles, metals, engineering, vehicles) and financial institution credit contribute majorly to the state credit led by PSU banks. Private banks are dominant in retail loans (credit card in particular). Share of small loans in overall state credit is mere 4% vs the system average of 9%.

* Deposit profile – CA and TD more dominant; SA surprisingly lower: MH is now broadly mirroring system deposit growth; the state’s deposit market share is stable since FY17. Peculiar trend is of CA deposits (at 15% vs national average of 9%) and TD (65% vs 58%) being dominant in MH with SA deposit share significantly lower at 20% than the pan-India average of 33%. Lower than national average share of household segment and higher share of corporates explain the lower SA share in MH. Share of private (38%) and foreign (11%) banks in Maharashtra deposit base is much higher than the national average. Interestingly, foreign banks constitute 30% of CA deposits of MH. Except for Mumbai city, (C/D ratio of 114%), rest of the metro cities in MH are more deposit-centric (C/D ratio at <70%).

* Market is expanding beyond Mumbai city: Mumbai (including suburbs) is one of the largest metros – contributing 62% to the state’s total business. However, during past five years, Mumbai city registered muted 1% and 4% CAGR in credit and deposits, respectively. Rest of the leading metros – Pune, Nagpur, Thane and Mumbai suburbs – grew in excess of 10% between FY16-June’21.

* Private banks dominate metro markets; SFBs focusing on urban areas; SBI, Axis and Kotak having most balanced business presence: MH presents equal opportunities for mobilising credit as well as deposits; however, players are approaching the market differently. Federal, Bandhan and RBL are dominant in credit as reflected in their >100% C/D ratio while HDFCB (72% C/D ratio) and IIB (52%) appear to be relatively more focused on deposit. SBI, Axis and Kotak have a balanced business presence across credit as well as deposit. SFBs are more deposit-focused as reflected in the average C/D ratio of AU, Equitas, Ujjivan at <60%.

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