Structure of the Commercial Banking Sector in India

The commercial banking system is the core of India’s financial system as the financial sector of the country is bank dominated. Though cooperative banks also play a critical role in facilitating banking services in the country, the scheduled commercial banks are overwhelmingly important in terms of their asset size, branch networks, type of services delivering etc. The ccommercial banking sector comprises of public sector banks (State Bank of India and Nationalised Banks), private sector banks (old and new), foreign banks, Small Finance Banks and Payment Banks.

The commercial banking sector was evolved into the present status and structure after undergoing a big and extended evolution phase. Nationalisation of banks in two phases (1969 and 1980), entry of new generation banks and the reverse merger of Development Financial Institutions (like ICCI, IDBI etc.), creation of differentiated banks under Small Finance Banks and Payment Banks, recent consolidation of PSBs etc. conditioned the current banking structure in India. The merger of HDFC Bank Ltd and Housing Development Finance Corp, created a titanic shift in the Indian financial sector with the HDFC bank becoming a financial behemoth.

Figure: Structure of Commerical Banks in India

Uniqueness of scheduled commercial banks

Commercial banks in India are classified by the RBI into scheduled and non-scheduled banks from the angle of regulation. Bulk of the banks are scheduled whereas some banks like Local Area Banks re non-scheduled. As scheduled banks, the scheduled commercial banks come under exceptional regulatory and supervisory standards of the RBI. At the same time, they get the advantage of availing special facilities from the RBI like Liquidity Adjustment Facility, Deposit Insurance, Lender of Last Resort etc.

Asset share of SCBs in India (2022)
Category In Rs crores % Share
PSBs 12706661 59%
Private Banks 7371715 34%
Foreign Banks 1368521 6%
SFBs 203076.2 1%
PBs 17681.3 0%
Total 21667655 100%
Source: RBI DBIE

Structure of scheduled commercial banks in India

The commercial banking sector is dominated by Public Sector Banks (PSBs) and as of March 31 st , 2022, the PSBs have nearly 60% market share in terms of assets, followed by private sector. Still, their asset share has been declining over the last two decades. The asset share (share in banking sector loans and investments) is the best indicator to measure the size and importance of each banking entity.

Table: Market Capitalistion of Scheduled Commercial Banks Post Merger of HDFC Bank Ltd and Housing Development Finance Corp.

Rank Bank Market capitalisation( ₹crore)
1. HDFC Bank (post merger) 14,12,055.5
2. ICICI Bank Ltd 6,53,704.04
3. State Bank of India 5,11,201.77
4. Kotak Mahindra Bank Ltd 3,66,967.55
5. Axis Bank Ltd 304211.88
6. Indusind Bank Ltd 106707.03
7. Bank of Baroda 98436.88
8. IDBI Bank Ltd 59482.29
9 Punjab National Bank 56882.91
10. Canara Bank 54750.45

The scheduled commercial banks in India are classified under different categories: Public Sector Banks (PSBs), private sector banks, foreign banks, regional rural banks (RRBs), foreign banks, small finance banks and payment banks. As of March 2023, there are:

(1) Public Sector Banks (PSBs): Public Sector banks are owned by the government. They have the largest share in India’s commercial banking system. PSBs consists of Nationalised Banks and the SBI. The SBI is the largest bank in India, while the Punjab National Bank is the second-largest among PSBs. In recent years, the government merged several nationalised banks. Now there are only 12 public sector banks.

(2) Private sector Banks (PVBs): The private sector banks are old private sector banks and new private sector banks. These banks are performing well in terms of profit and health. Their NPAs are low compared to that of the PSBs. The private sector banks, including HDFC and ICICI etc, are very competitive and are providing a large variety of products.

(3) Foreign Banks: There are only 45 foreign banks in India. The foreign banks are operating in branch mode and subsidiary mode.

Old Private Sector Banks New Private Sector Banks
CITY UNION BANK LIMITED AXIS BANK LIMITED
CSB BANK LIMITED BANDHAN BANK LIMITED
FEDERAL BANK LTD HDFC BANK LTD.
JAMMU & KASHMIR BANK LTD ICICI BANK LIMITED
KARNATAKA BANK LTD IDBI BANK LIMITED
KARUR VYSYA BANK LTD IDFC FIRST BANK LIMITED
NAINITAL BANK LTD INDUSIND BANK LTD
SOUTH INDIAN BANK LTD KOTAK MAHINDRA BANK LTD.
TAMILNAD MERCANTILE BANK LTD YES BANK LTD.
THE DHANALAKSHMI BANK LTD DCB Bank
RBL Bank

(4) Small Finance Banks: Small finance banks are private sector banks that offer limited products to the customers. They are formed in 2016 after the RBI’s differentiated bank licensing policy to further financial inclusion through tailored deposit products and for providing credit to small business units, small and marginal farmers, micro and small industries and other unorganized sector entities through technology led low-cost operations. At end-March 2022, twelve SFBs with 5,677 domestic branches across the country. Most of the small finance banks operate in semi-urban areas. The SFBs achieved a priority sector lending rate of 85% as of March end 2022.

(5) Payment Banks: These are licensed by the RBI to perform payment services and has only limited banking functions. PBs were set up as niche entities to facilitate small savings and to provide payments and remittance services to migrant labour, low-income households, small businesses and other unorganised sector entities. At end-March 2022, 4 PBs were operational, of which only three managed to become profitable in their operations. The Indian Postal Payment Bank (IPPB) is the first scheduled payment bank. Income from remittance operations formed a major part of income of PBs.

(6) Regional Rural Banks: RRBs are promoted by the central government, state government and the sponsoring scheduled commercial bank. The RRBs gives loans to small and marginal farmers and other priority sectors. Their number is shrinking as the RBI, and the government are trying for their consolidation.

Besides these, there are Local Area Banks (LABs) as well. But they are non-scheduled banks and doesn’t have much limelight because of their declining size. Local Area Banks (LABs) are small private banks designed as low-cost banks to promote efficient and competitive financial intermediation services in a limited area. They are concentrated primarily in rural and semi-urban areas. There are only four LABs in India.

Table: Ranking of Scheduled Commercial Banks in terms of asset share (before the merger of HDFC on July 1st, 2023

Bank Total Assets As a % of total assets Type of Bank
STATE BANK OF INDIA 4987597.41 23.02 PSB
HDFC BANK LTD. 2068535.05 9.55 PvB
ICICI BANK LIMITED 1411297.74 6.51 PvB
PUNJAB NATIONAL BANK 1314805.02 6.07 PSB
BANK OF BARODA 1277999.83 5.90 PSB
CANARA BANK 1226979.67 5.66 PSB
UNION BANK OF INDIA 1187591.06 5.48 PSB
AXIS BANK LIMITED 1175178.11 5.42 PvB
BANK OF INDIA 734614.01 3.39 PSB
INDIAN BANK 671668.06 3.10 PSB
KOTAK MAHINDRA BANK LTD. 429428.40 1.98 PvB
INDUSIND BANK LTD 401974.58 1.86 PvB
CENTRAL BANK OF INDIA 386565.59 1.78 PSB
YES BANK LTD. 318220.23 1.47 PvB
IDBI BANK LIMITED 301419.36 1.39 PvB
INDIAN OVERSEAS BANK 299377.17 1.38 PSB
UCO BANK 267784.02 1.24 PSB
HONGKONG AND SHANGHAI BANKING CORPN.LTD. 247310.08 1.14 FB
CITIBANK N.A 233264.53 1.08 FB
BANK OF MAHARASHTRA 230611.37 1.06 PSB
FEDERAL BANK LTD 220946.31 1.02 PvB
IDFC FIRST BANK LIMITED 190181.61 0.88 PvB
STANDARD CHARTERED BANK 175938.12 0.81 FB
DEUTSCHE BANK AG 147954.86 0.68 FB
BANDHAN BANK LIMITED 138866.55 0.64 PvB
JAMMU & KASHMIR BANK LTD 130602.41 0.60 PvB
PUNJAB AND SIND BANK 121067.55 0.56 PSB
RBL BANK LIMITED 106208.58 0.49 PvB
SOUTH INDIAN BANK LTD 100052.42 0.46 PvB
KARNATAKA BANK LTD 92040.55 0.42 PvB
JPMORGAN CHASE BANK NATIONAL ASSOCIATION 90873.76 0.42 FB
DBS BANK INDIA LTD. 84361.61 0.39 FB
KARUR VYSYA BANK LTD 80043.72 0.37 PvB
AU SMALL FINANCE BANK LIMITED 69077.80 0.32 SFB
BANK OF AMERICA , NATIONAL ASSOCIATION 62332.83 0.29 FB
CITY UNION BANK LIMITED 61530.91 0.28 PvB
BNP PARIBAS 58674.53 0.27 FB
TAMILNAD MERCANTILE BANK LTD 52858.49 0.24 PvB
DCB BANK LIMITED 44840.14 0.21 PvB
BARCLAYS BANK PLC 40146.09 0.19 FB
MUFG BANK LTD 34703.77 0.16 FB
EQUITAS SMALL FINANCE BANK LIMITED 26951.90 0.12 SFB
SUMITOMO MITSUI BANKING CORPORATION 26556.61 0.12 FB
CSB BANK LIMITED 25356.27 0.12 PvB
UJJIVAN SMALL FINANCE BANK LIMITED 23604.46 0.11 SFB
CREDIT SUISSE AG 20732.07 0.10 FB
MIZUHO BANK LTD 20492.69 0.09 FB
JANA SMALL FINANCE BANK LIMITED 20188.71 0.09 SFB
ESAF SMALL FINANCE BANK LIMITED 17707.56 0.08 SFB
CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK 16652.57 0.08 FB
UTKARSH SMALL FINANCE BANK LIMITED 15063.77 0.07 SFB
THE DHANALAKSHMI BANK LTD 13795.76 0.06 PvB
SHINHAN BANK 13315.71 0.06 FB
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED 12520.27 0.06 FB
FINCARE SMALL FINANCE BANK LIMITED 10905.90 0.05 SFB
FIRST ABU DHABI BANK PJSC 10297.42 0.05 FB
PAYTM PAYMENTS BANK LIMITED 9359.77 0.04 PB
SOCIETE GENERALE 9097.65 0.04 FB
AMERICAN EXPRESS BANKING CORP. 8677.60 0.04 FB
NAINITAL BANK LTD 8337.86 0.04 PvB
SURYODAY SMALL FINANCE BANK LIMITED 8180.18 0.04 SFB
SBM BANK (INDIA) LTD. 8084.62 0.04 FB
CAPITAL SMALL FINANCE BANK LIMITED 7153.92 0.03 SFB
BANK OF NOVA SCOTIA 5135.34 0.02 FB
NATWEST MARKETS PLC 4760.45 0.02 FB
WOORI BANK 4653.33 0.02 FB
EMIRATES NBD BANK (P.J.S.C.) 4581.87 0.02 FB
INDIA POST PAYMENTS BANK LIMITED 4501.11 0.02 PB
INDUSTRIAL AND COMMERCIAL BANK OF CHINA 3817.59 0.02 FB
COOPERATIEVE RABOBANK U.A. 3774.70 0.02 FB
CTBC BANK CO., LTD. 2666.52 0.01 FB
BANK OF BAHRAIN & KUWAIT B.S.C. 2592.42 0.01 FB
KEB HANA BANK 2531.65 0.01 FB
NORTH EAST SMALL FINANCE BANK LIMITED 2352.00 0.01 SFB
AIRTEL PAYMENTS BANK LIMITED 2140.42 0.01 PB
SHIVALIK SMALL FINANCE BANK LIMITED 1890.02 0.01 SFB
KOOKMIN BANK 1856.66 0.01 FB
FINO PAYMENTS BANK LIMITED 1680.00 0.01 PB
QATAR NATIONAL BANK (Q.P.S.C.) 1546.41 0.01 FB
UNITED OVERSEAS BANK LTD 1407.96 0.01 FB
MASHREQ BANK PSC 1394.58 0.01 FB
DOHA BANK Q.P.S.C 1281.99 0.01 FB
SBERBANK 942.88 0.00 FB
INDUSTRIAL BANK OF KOREA 825.22 0.00 FB
BANK OF CEYLON 564.83 0.00 FB
BANK OF CHINA LIMITED 410.48 0.00 FB
FIRSTRAND BANK LTD 352.74 0.00 FB
AB BANK LIMITED 343.46 0.00 FB
JSC VTB BANK 300.46 0.00 FB
ABU DHABI COMMERCIAL BANK PJSC 296.67 0.00 FB
PT BANK MAYBANK INDONESIA TBK 267.65 0.00 FB
SONALI BANK 164.33 0.00 FB
KRUNG THAI BANK PUBLIC COMPANY LIMITED 63.86 0.00 FB
PSB-Public Sector Bank, PB-Private Sector Bank, FB-Foreign Bank, SFB, Small Finance Bank, PB-Payment Bank

Source: RBI Data Base on Indian Economy