Mumbai: The new private sector banks have witnessed the highest growth in assets at 43.2 per cent during 2005-06 followed by foreign banks which have grown at 31.2 per cent, while public sector banks (PSBs) have reported a 13.6-per cent growth during the period, the Reserve Bank of India (RBI) said in its report on Trends and Progress of Banking in India, 2005-06.

Public sector banks have been unable to match asset growth of foreign banks and new private sector banks during 2005-06, due to forced liquidation of government securities to meet high credit demand, the report said.

However, the asset growth rates have been lowest for old private sector banks at 12.2 per cent for the 2005-06 period, the report said.

The share of PSBs in total assets of scheduled commercial banks declined considerably to 72.3 per cent at the end of last fiscal from 75.3 per cent at the end of March 2005, the report said.

The share of new private sector banks rose to 15.1 per cent from 12.5 per cent in the same period.

This mainly mirrors the trend in deposits, which have risen in the case of new private sector banks but dipped in the case of PSBs, between the period 2004-05 and 2005-06, the report shows.

Banks improved their asset quality in the year to March after they sold or restructured debt and firms paid up from healthy profits, cutting the net bad loan component of total lending, the RBI report said.

Net bad loans fell to 1.2 per cent of net loans in the year to March 2006, from 2 per cent a year earlier.

During the fiscal year 2005-06, top bad debts firm Asset Reconstruction Co. of India Ltd. bought bad loans worth Rs21,130 crore ($4.71 billion) from banks, the report said.

New private sector banks like HDFC Bank and UTI Bank, founded in mid-1990s, are eating into the market share of state-run firms as they lend aggressively to the retail and services sectors.

"New private sector banks had the highest exposure to the sensitive sectors mainly due to the increase in exposure to the real estate market, followed by foreign banks," the report said.

Retail loans grew 40.9 per cent to Rs376000 crore during the year driven by home loans, sharply higher than overall loan growth of 31 per cent, it said.

Automobile loans surged 75 per cent to Rs61,369 crore, from Rs35,043 crore, and home loans rose 33.6 per cent to Rs179,000 crore from Rs134,000 crore, the report said.