India’s private sector banks are on the ascendancy. At the top of the corporate banking market, the country’s three biggest private sector banks have in aggregate, matched the State Bank of India in terms of market penetration with large and middle-market Indian companies. In addition, smaller private banks are also gaining ground, while foreign banks become more selective in the role(s) they play for large and midsize Indian corporates.
The strong growth of the country’s private sector banks is due to a combination of favorable regulation and impressive technological innovation. The Reserve Bank of India's 2020 circular establishing new rules on current accounts —effectively ensuring a minimum size relationship that corporates had with their bank — strengthened the competitive advantage of large corporate lenders.
Aided by those tailwinds, the combined market penetration of Axis Bank, ICICI Bank and HDFC Bank in domestic cash management has grown to 40% of Indian companies compared with 35% two years earlier. These large private banks also expanded their footprint in international cash management, where large foreign banks also increased penetration with many of those gains coming at the expense of other foreign banks.
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