Opposite to well-liked notion, a working paper by the Financial Advisory Council to the Prime Minister (EAC-PM) has stated that effectivity of public sector banks (PSBs) is significantly better than personal banks and international banks.
The paper, authored by Soumya Kanti Ghosh (Half-time member, EAC-PM and Group Chief Financial Advisor at State Financial institution of India) and Tapas Kumar Parida (Economist at State Financial institution of India) studied 47 banks for the interval FY15 to FY26 and employed Knowledge Envelopment Evaluation (DEA) to calculate effectivity and productiveness of the banks. It studied 12 public sector banks, 21 personal sector banks and 14 international banks. These banks cowl greater than 95 per cent of the property of the banking system.
Effectivity has been measured between 0 and 1, and the vary is expressed in share phrases.
The paper discovered that PSBs effectivity improved to 93.12 per cent in FY26 from 72.46 per cent in FY20, citing subsequent capital infusion and technological upgradation in choose PSBs as key causes for enchancment. “PSBs are comparatively extra environment friendly than personal banks besides FY19-FY22, which can be as a consequence of merger and rationalisation of enterprise, branches, and workers,” the paper stated.
Additional, personal sector banks recorded enchancment to over 86 per cent in FY26 from round 78 per cent in FY20. International banks (FBs) effectivity remained 83-85 per cent throughout FY20 to FY26. Additional, “it’s attention-grabbing to know that the efficiency of PSBs is in a greater place in comparison with personal banks, particularly over the past 3 years, i.e., FY24 to FY26,” the paper stated.
Amongst PSBs, SBI performs comparatively higher and scored 97.49 per cent through the full pattern interval FY15-FY26, adopted by Financial institution of Maharashtra (BoM) at 90.49 per cent. Among the many personal banks, HDFC Financial institution has scored 97.54 per cent adopted by IDBI Financial institution at 96.51 per cent. Amongst international banks, HSBC and JP Morgan have scored 1. Throughout the entire examine interval FY15 to FY26, JP Morgan and HSBC have been ranked at 1st place adopted by Citibank at third, HDFC Financial institution at 4th and SBI at fifth place. “The FBs effectivity is best than the home banks principally as a consequence of their prevalent enterprise fashions,” the paper stated.
Speaking in regards to the long-term, the paper emphasised that banking in India will change. Among the most important drivers of this variation will embrace hyper-personalisation by AI that may tailor the wants of younger particular person clients. Subsequently, there might be a shift from reactive to proactive service deepening buyer relationships and improve institutional loyalty. “In precept, banks will more and more give attention to data-driven buyer experiences, AI automation, and strong knowledge safety. Thus, product choices and supply will develop into customised within the coming years,” it stated.
The paper expects India being a multi-language nation the creation of foundational AI fashions will collect tempo. Banks might be exploring at appropriate time to harness these India-specific foundational fashions for a number of language onboarding and hyper-customisation of providers. The long-term constructive outlook of India stays intact. India’s sovereign score stays steady at BBB after its revision in August 2025.
“Given the robust fundamentals corresponding to excessive financial savings price, satisfactory FX reserves at greater than $700 billion, well-capitalised banking and cash-rich company steadiness sheet the long-term outlook of excessive progress is possible,” the paper concluded.
Printed on August 25, 2026
