The Annual Report of RBI 2025 and Basic Statistical Return 1 and 2, March 2025, reveal the increasing share of number of deposit accounts, deposits, loan accounts, and loan amount shifting to private banks. It’s a clever ploy of the government. They converted ICICI, a public sector institution, into ICICI Bank, into a private bank. HDFC into HDFC Bank, UTI into Axis Bank. All as Private Banks and now the majority shareholding is with foreigners.
Government business was given to private banks; Small finance banks were promoted into the private sector. The most destructive plan was reducing staff strengths in public sector banks so that the customer service becomes poor. Public banks focus more on large deposits and large loans, and customers shift to private banks. In the last ten years, the process has been speeded up. Let’s analyse in detail.
| Category | 2014 | 2025 |
|---|---|---|
| PSBs | 1,60,993 | 7,48,707 |
| RRBs | 52,731 | 96,608 |
| Private Banks | 20,616 | 8,38,441 |
| Small Finance Banks | – | 1,81,712 |
| Payment Banks | – | 7,098 |
| Foreign Banks | 45 | 28,131 |
| Total | 2,34,385 | 19,00,697 |
In 2014, there were 2,13,724 (91%) employees in Public Sector Banks if Regional Rural Banks (RRBs)were added to PSBs. Along with Foreign Banks, Private Sector Banks had only 20,661 (9%)of the total employees. 102257(84.5%) branches were with PSBs and 18708 (15.5%) branches were with Private banks.
88.2% of the deposit accounts and 78.8% of the deposits were with Public banks. Private Banks had 11.8% of the accounts and 21.2% of the deposits. Public Sector Banks had 70.9% of the loan accounts and 75.7% of the loan outstanding. Private banks had only 29.1% of the loan accounts and 24.3% of the loan outstanding.
In 2025, PSBs including RRBs employ 8,45,315 (45%). Private Banks including SFB, FB, and Payment Banks employ 10,55,382 (55%). This is one indicator to show how private banks have grown and public banks have got weakened now. One should remember that there is no reservation policy for appointments in Private Banks.
Out of the total deposits of Rs 2,39,06,3261 crores, Public Banks have Rs 13,34,9808 crores, RRBs have Rs 7,03,204 crores (Rs 14,04,8012 crores together), whereas Private Banks have Rs 8,40,5190 crores, Foreign Banks have Rs 11,07,624 crores, SFBs Rs 3,15,390 crores, and Payment Banks Rs 25,046 crores. So, 59% of the deposits(reduced from 78.8%) are with Public Banks and 41% with Private Banks as on March 2025. The number of deposit accounts serviced by the Public Banks is 1643477000 (69%)(reduced from and Private Banks is 746785000.(31%). Its clear that the Private serve the rich more and Public Banks serve the poor more.
What is astonishing is that Public Sector Banks service 12,76,32,859 loan accounts (37%) and provided Rs 14,41,2715 crore (52%) loans. This was 29.1% and 24.3% in 2014.
In 2025, When we look at small loans less than Rs 25,000, PSBs have 81,44,691 accounts with a loan limit of Rs 9,972 crore, whereas Private Banks have 4,17,86,515 accounts with a credit limit of Rs 5,04,655 crores.
On loans above Rs 25,000 and less than Rs 2 lakhs, PSBs have 6,33,14,424 accounts and Rs 66,097 crore loan limit; Private Banks have 11,98,92,393 accounts and loan limit Rs 9,21,314 crores.
The main reason for this shift is the number of staff in Public Sector Banks. They do not have staff to take care of small deposits and small borrowers, though they are the ones who have opened 97% of the Jan Dhan accounts.
One of the chilling effects is the number of MSME accounts going down. From 231.9 lakh micro enterprise accounts in 2023-24, the number of accounts has come down to 225.8 lakhs and 15.5 lakh small enterprise accounts in 2024-25. The total number has come down to 245.3 lakh from 257 lakh in one year. They are pushed to Non-Banking Finance Corporations and Micro Finance Institutions.
Just in one year between 2024 and 2025, year-to-year growth in credit shows a massive degrowth.
| Sector | 2024 | 2025 |
|---|---|---|
| Non-Food Credit | 16.3% | 12% |
| AGL and Allied | 20.04% | 10.47% |
| Micro and Small | 14.4% | 9.1% |
| Infrastructure | 5.6% | 1.7% |
| Textiles | 11.1% | 8.3% |
| Food Processing | 14.9% | 5.1% |
| Services | 17.2% | 15.8% |
| Consumer Durables | 13.0% | 1.3% |
| Housing | 17.1% | 15.3% |
| Vehicle Loans | 17.6% | 8.6% |
| Credit Cards | 25.6% | 10.6% |
| Other Personal Loans | 18.64% | 8.4% |
In medium enterprise, the loan growth increases from 13.2% to 18.6% and large from 5.8% to 6.4%. This is a great injustice to the people of the country. People are forced to go to NBFCs and MFIs. India is still an underbanked country. We need doubling of Public Sector Bank branches and tripling of the employee strength.
Private Banks charge higher interest, take more service charges, and use intermediaries to process loans and recover loans. The starting interest rate for housing loans in Union Bank of India is 7.85%, but in Kotak Mahindra Bank it is 8.65%, Axis Bank 8.75%, IDFC Bank 8.85%, Federal Bank 9.65%.
For MSMEs, SBI provides loans from 8% p.a., whereas private banks charge even 17%, and NBFCs charge even more. Fintechs charge even higher.
A driver in Delhi was running from pillar to post for a housing loan. No Public Sector Banks were willing to give the loan, quoting the rules. Finally, he has availed the loan from an NBFC. For a loan amount of Rs 13,36,208 he has to give 11% interest, and the EMI for 30 years is Rs 12,725. He will be paying Rs 45,81,000. In a Public Sector Bank, he would be paying less than 50% of this.
In addition to this, he has to pay Rs 46,208 p.a. for 3 insurance policies compulsorily. In addition, he is paying Rs 23,651 as processing charge. This is just one example.
Access to credit is the real financial inclusion. Out of 142 crore population, less than 41 crore have bank loans. The rural branches of the banks have gone down, and Metros have increased. The only solution is to increase banking to the rural areas as envisioned during Nationalisation. The Public Sector Banks should be allowed to expand, and recruitment of officers, clerks, and subordinate staff on a large scale. PSBs can absorb 10 lakh employees each year over the next 3 years and provide employment for 30 lakh youth with reservation. This will also reduce NPA due to following due diligence and meticulous follow up.
Instead RBI has given permission to Flipcart to function as a NBFC and Annapurna Finance to start an Universal Bank. India Post Bank which was originally envisioned as an Universal Bank providing last mile connectivity to the people was made a Payment bank and outsourced to Aditya Birla group.
This government in the last 11 years is handing over the people of the country to Private Banks, NBFCs and Fin Techs who exploit them with higher interest, charge heavily and even abuse when repayment is delayed.
The huge opportunity to employ the youth in decent jobs in banks with the reservation policy is lost.
United Forum of Bank Unions has rightly included this as an important strike issue. The Prime Minister has to act, as he seems to be the only person taking decisions in the country. The economy will flourish, and the inequality will come down. There will be a multiplier effect.
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Please refer to Random Reflections dated May 22, 2025, where we critically looked at the new RBI guidelines on Gold loans. Thanks to Su Venkatesan MP and M K Stalin Honourable CM of Tamilnadu for taking it up. RBI has issued revised guidelines which has addressed most of the issues raised in the article. |
Thomas Franco is the former General Secretary of the All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.
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