PSU Banks Boost Retail Loans As Unsecured Lending Stays Under Watch

PSU banks are expanding faster in retail credit by pushing home, auto and gold loans, while private banks stay cautious on unsecured personal loans and cards.

Public sector banks have stepped up retail lending at a time when unsecured credit is no longer being chased as aggressively as before. The current phase is being shaped by safer products with collateral behind them, especially housing, vehicle and gold loans. 

For Indian borrowers, this means PSU banks are becoming more active in everyday asset-backed credit, while private lenders are being more selective in personal loans and credit cards. The trend became visible in the June quarter, when PSU banks posted stronger retail growth than large private peers.

How PSU Banks Are Pulling Ahead?

The June-quarter comparison shows PSU banks are growing retail books almost twice as fast as private sector rivals in some cases. Economic Times reported on 11 August 2025 that the advantage came from a larger customer pool, lower delinquencies and better pricing power because of a higher share of retail deposits.

Official disclosures back that up. SBI said in its Q4 FY25 analyst presentation, published on 3 May 2025, that retail personal advances stood at ₹15.06 lakh crore, with gross NPA at 0.74% and retail personal slippage ratio at 0.48%. Bank of Baroda said in its Q4 FY25 analyst presentation that organic retail advances rose 19.4% YoY to ₹2.57 lakh crore as of 31 March 2025. PNB said in its FY25 results release on 7 May 2025 that total retail credit rose 16.5% YoY to ₹2.59 lakh crore, while housing loans grew 18.3% to ₹1.16 lakh crore.
 
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These numbers show PSU banks widened the gap in retail lending growth, while private banks stayed more selective in unsecured-heavy segments.

What Happened Earlier?

The build-up started in 2023, when concerns over fast-growing unsecured lending began to show up more clearly across the system. Reuters reported on 16 November 2023 that tighter capital rules for personal loans and credit cards were expected to make such loans costlier and curb growth in those categories, which had been growing faster than overall bank credit of about 15% over the prior year.

A day later, Reuters reported that the new rules were likely to raise consumer borrowing costs and weigh on growth and profitability for lenders with bigger exposure to unsecured retail credit. On 8 December 2023, Reuters also reported a deputy governor saying the aim was to moderate excessive lending, not stop credit flow.

LoansJagat’s note published on 28 October 2025 added that no-collateral loans are harder to recover once stress rises, which is why unsecured retail credit remains a pressure point for banks.
 
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Bank of Baroda organic retail advances at ₹2.57 lakh crore, up 19.4% YoY

Bank of Baroda Q4 FY25 analyst presentation, FY25

PNB total retail credit at ₹2.59 lakh crore, up 16.5%; housing loans at ₹1.16 lakh crore, up 18.3%

PNB FY25 results release, 7 May 2025

The official bank figures above are taken from the banks’ FY25 disclosures referenced in earlier reporting and company presentations.

What Bankers And Analysts Are Saying?

Economic Times cited Emkay Global’s Anand Dama saying PSU banks are better placed because their retail books are dominated by mortgages, vehicle and gold loans. Reuters reported on 17 November 2023 that then SBI chairman Dinesh Kumar Khara said the impact on SBI’s capital ratios would be minimal at 55-60 bps.