Public sector banks see 87% fall in pension fund deposits
What's the story
Public sector banks (PSBs) have seen a massive drop in pension fund deposits over the last five years, even when the broader banking system continued to gain from this segment. The decline is nearly 87%, from ₹22,516 crore in March 2020 to just ₹2,969 crore by March 2025. Meanwhile, all scheduled commercial banks (SCBs) saw their total pension fund deposits more than double during this period, reaching ₹66,883 crore.
Market shift
Private banks have cornered larger share
The data indicates that private banks have captured a bigger chunk of this long-term, stable deposit pool at the cost of state-owned lenders. A senior bank official told Business Standard, that "This indicates that private banks have cornered a larger share of this long-term, stable deposit pool, at the expense of state-owned lenders."
Information
Shift in household deposits
The household sector, a major source of deposit mobilization for PSBs, is also showing signs of strain. In FY25, PSBs accounted for only 50.3% of incremental deposits from households. This indicates that savers are increasingly turning toward private sector banks and other investment options.
Deposit decline
Decline in government deposits
PSBs have also been losing their grip on government deposits, with their share falling from 77.5% in March 2020 to 73.6% by March 2025. Private banks, on the other hand, saw an increase from 22.1% to 25.6% during this period. A more pronounced shift was seen in household deposits, where PSBs' share fell sharply from 70.6% to 63%.
Mobilization push
Finance Ministry's advice to PSBs
In June 2025, Union Finance Minister Nirmala Sitharaman urged PSBs to step up their efforts in deposit mobilization. She stressed the importance of expanding corporate lending in productive sectors while maintaining strong underwriting and risk management standards. The finance ministry had also asked PSBs to protect their net interest margins (NIMs) through liability-side discipline and asset diversification.