Public sector banks tighten grip on home loan market, eat into private banks’ share

Loan origination is the process by which a borrower applies for a loan and a lender processes that application, leading to the approval, documentation, and disbursal of the loan.

The outstanding home loan portfolio grew at a steady 12.8 per cent, reaching Rs 41.2 lakh crore as of June 2026.

Despite the dip in market share, private banks continued to command the highest average ticket size at Rs 41 lakh, although this marked a 3.3 per cent year-on-year decline. PSBs came in next with Rs 35.3 lakh, registering a notable 12.6 per cent increase, while Housing Finance Companies (HFCs) reported an average ticket size of Rs 24.6 lakh, up 11.8 per cent over the previous year, CRIF High Mark said.

The growth in originations value has been primarily driven by PSBs, which recorded a growth of 36.1 per cent year-on-year, compared to -11.2 per cent degrowth for private banks, and a 7.1 per cent increase for HFCs in Q1 FY26.

The average ticket size increased from Rs 30.4 lakh in the June quarter of FY25 to Rs 32.0 lakh in Q1 FY26, and up from Rs 28.0 lakh in Q1 of FY24, indicating a clear shift toward higher ticket sizes among borrowers, it said.

One of the most striking shifts in the housing loan market has been the rise of the Rs 75 lakh-plus loan category, which became the largest segment by origination value in Q1 FY26. This segment accounted for 38 per cent of total home loan value, up from 33.6 per cent in the June quarter of FY25, overtaking the Rs 5–35 lakh bracket that previously led.

Here too, PSBs stole the spotlight, increasing their value share in the Rs 75 lakh-plus segment from 38 per cent to 51 per cent, firmly taking the lead. Private banks, on the other hand, saw their share fall from 44 per cent to 33 per cent, while HFCs maintained a stable 12 per cent across both quarters, CRIF High Mark said.

Still, in terms of volume, the Rs 5–35 lakh loan range remains dominant, underlining the persistent demand for affordable housing across the country. Analysts suggest this reflects strong traction in tier 2 and 3 cities, where PSBs have a wider reach and better penetration compared to their private counterparts.

This shift comes at a time when home loan margins have come under pressure, following the RBI’s 100 basis point cut in the repo rate since February. Despite the rate cuts, several banks have increased home loan interest rates to protect their margins, citing rising funding costs and tight liquidity conditions. As a result, the benefits of the RBI’s accommodative stance have not been fully passed on to borrowers. Public sector banks, however, appear to have absorbed some of the margin pressure to maintain competitive rates, which may have helped them gain market share in the home loan segment.

With PSBs aggressively pushing into higher-value loans while retaining dominance in affordable segments, private lenders may need to recalibrate their home loan strategies to stay competitive.