The home loan market has seen a significant shift in India with public sector banks (PSBs) widening their lead in the wake of lower interest rates, narrower margins and government-led affordability schemes.

Big-ticket loans seem to be the flavour of the day as borrowers for home loans above Rs 75 lakh have been on the rise, recent data by a credit information bureau has showed.

PSBs have increased their share in the overall home loan outstanding by value to 46.2% in the June quarter from 37.6% a year ago despite higher incidence of stress, according to CRIF High Mark. The volume share has also jumped to 41.9% from 36.5%.  

Private sector banks, in comparison, saw their share drop to 28.2% from 35.2% during the same period. Their volume share also slipped to 22% from 25.2% year-on-year.

Private sector lenders have stayed away to protect their margins as they found the home loan interest rates offered by many banks ‘irrational’. With the Reserve Bank of India (RBI) cutting repo rate by 100 basis points since February to 5.5%, lending margins of banks have come under squeeze. PSBs, however, have been aggressive to increase their share in the home loan market and offered competitive rates by absorbing the margin pressure.

PSBs' delinquencies on home loans are the highest with 2.85% of the outstanding amounts not paid for between 31-90 days during the June quarter, according to the report.

Private sector lenders, in comparison, have only 1.04% of the loans unpaid. The lower delinquency rates at private sector banks indicate "robust underwriting and early risk detection", the report said.

In the case of PSBs, higher delinquency rates were observed in ticket sizes below Rs 35 lakh.

The outstanding home loan portfolio grew 12.8% to Rs 41.2 lakh crore as of June 2026.

Higher ticket size loans are preferred, with the report stating that 38% of the originations value were for loans above Rs 75 lakh as against 33.6% in the year-ago period. This was the largest segment by origination value in Q1 FY26, surpassing the Rs 5-35 lakh bracket that previously led.

In terms of volume, though, the Rs 5–35 lakh loan bracket remains the larger play, with demand for affordable housing staying persistent across the country. Strong demand came from tier 2 and 3 cities, where PSBs have a wider reach and better penetration compared to their private peers.

The lead in the Rs 5-35 lakh home loan segment was taken by PSBs who increased their value share to 51% from 38% a year ago. Private banks conceded their lead, falling to 33% from 44% earlier, while housing finance companies (HFCs) maintained a stable 12% across both quarters, CRIF High Mark data showed.

The average ticket size rose to Rs 32 lakh in Q1 FY26 from Rs 30.4 lakh in the June quarter of FY25, and up from Rs 28 lakh in Q1 of FY24.

Loans between Rs 5 and Rs 55 lakh declined to 31.2% in the June quarter, from 34.7% in the year-ago period.

Private banks enjoyed the highest average ticket size at Rs 41 lakh, despite a 3.3% year-on-year decline. PSBs reported an average ticket size of Rs 35.3 lakh, registering an increase of 12.6%. For HFCs, the average ticket size was at Rs 24.6 lakh, up 11.8% over the previous year, CRIF High Mark said.

The strategy of PSBs has been two-fold as they plotted to gain market share at a time when the RBI lowered interest rates and margins came under pressure. While they were aggressive in the higher-value home loans, they retained dominance in affordable segments. Private lenders will perhaps change their game plan in the later part of the current financial year to get back their share.