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PSBs Lag in Premium Cards and GCC Banking as CASA Share Shrinks, Finance Ministry Conclave Notes

Deliberations at a conclave organised by the Union Finance Ministry have highlighted that public sector banks (PSBs) are experiencing a rapid decline in market share across high-value banking segments, including credit cards and global capability centres (GCCs), while also facing an erosion in their low-cost deposit base.

What Happened

According to discussions and a background paper prepared for the Finance Ministry conclave, state-run lenders have ceded ground to private and foreign competitors in key high-margin sectors. The meeting underscored that PSBs have seen their share of current account and savings account (CASA) balances shrink within total deposits over the past four years. In the credit card landscape, public sector institutions remain structurally under-represented in premium categories, largely relying on lower-tier variants and static reward structures. Meanwhile, foreign and private banks continue to dominate relationships with multinational GCCs.

Key Highlights

  • CASA Deposit Pressures: A paper prepared for the conclave noted that CASA represents the lowest-cost source of funds for banks. A four-year decline in CASA share has increased PSBs’ reliance on more expensive deposits, weighing on funding costs and margins.
  • Credit Card Deficits: While institutions like Amex, HDFC, Axis, ICICI (offering 20 to 50 card variants) and SBI have built dedicated underwriting, sales, and service capabilities for high-net-worth individual (HNI) metal cards, corporate travel and expense cards, and MSME business cards, most PSBs lack scalable, structured sourcing models in these segments.
  • GCC Expansion: The number of GCCs in India is projected to rise from approximately 2,100 currently to around 5,000 by 2030, contributing an estimated $150 billion to $200 billion to the national economy.
  • Private and Foreign Bank Dominance: GCCs predominantly maintain core banking ties with foreign banks, while private banks lead in opening current accounts through offshore branch outreach, designated multinational coverage teams, and bundled product platforms.
  • Ancillary Opportunities for PSBs: State-run lenders were identified as having near- to medium-term prospects in ancillary avenues, such as trade finance, payroll banking, and retail cross-selling to the GCC workforce.

Why This Matters

The shift directly affects the financial viability and profitability of public sector lenders. Because CASA deposits supply the lowest-cost funding base, continuous erosion drives up overall borrowing costs and compresses net interest margins. Furthermore, being sidelined from high-value cards and fast-growing GCC corporate ecosystems limits PSBs from tapping into significant non-interest income and affluent retail banking customer bases.

What to Watch Next

To reverse these trends in the corporate domain, the paper suggested establishing dedicated GCC desks within each PSB and public financial institution within the next six months. In addition, state-run lenders are expected to appoint branch-level relationship managers across emerging Tier II and Tier III hubs—including Varanasi, Chandigarh, Mysore, and Vizag—to tap into the next phase of GCC growth.

Frequently Asked Questions

Why are CASA deposits critical for public sector banks?

CASA deposits serve as a bank’s lowest-cost source of capital. When their proportion declines relative to total deposits, lenders must turn to higher-cost deposits, which increases funding expenses and squeezes overall margins.

Why have PSBs struggled in the credit card market?

According to bankers at the conclave, state lenders have largely offered basic card variants with static, one-size-fits-all reward catalogues. They currently lack the scale, dedicated sales infrastructure, and specialized underwriting frameworks needed for corporate cards, business cards, and premium HNI segments.

What is the growth potential of Global Capability Centres (GCCs) in India?

GCCs are projected to expand from around 2,100 entities today to roughly 5,000 by 2030, with an expected economic contribution between $150 billion and $200 billion.

Source: timesofindia.indiatimes.com