The valuation gap between public sector banks (PSBs) and private lenders has been narrowing in recent months as the state-owned lenders continue to report stronger balance sheets and sustained profitability. Data from the NSE show that the trailing twelve-month price-to-earnings (P/E) ratio gap between the Nifty PSU Bank Index and the Nifty Private Bank Index moderated to about 9.41 as of March 13, compared with 11.85 in December. However, the interesting part is that this happened because the P/E of private banks declined while it was steady for PSBs. The P/E ratio of the Nifty PSU Bank Index stood at 8.45x as on March 13, largely unchanged from 8.44x in December. In contrast, the Nifty Private Bank Index saw its P/E ratio decline from 20.29x to 17.86x during the same period, leading to the valuation differential becoming narrow.