Bank Deposits Gain Pace in Q1 Even as Loan Growth Lags

Surplus liquidity in Q1FY26 is also expected to have aided deposit flows for banks

- Anshika Kayastha & Abirami Sekar

Deposit growth at banks picked up pace in the first quarter (April-June) of the current financial year, even as credit growth continued to be sluggish, initial business updates show.

Of the lenders that have declared their initial Q1 updates so far, year-on-year deposit growth nearly matched or outpaced loan growth for most private banks and Punjab National Bank, growing 8-16% for commercial banks and 19-31% for small finance banks.

On the other hand, loans grew 5-15% for most banks and 11-18% for small finance banks. In Q4, on-year loan growth for most large banks was in the range of 12-22%.

YES Bank and CSB Bank were the outliers in Q1FY26. YES Bank saw muted growth for both loan and deposits, with loans growing 5% and deposits 4%. CSB Bank saw loans growing 32% on year and deposits at 20%.

However, public sector banks such as Bank of Baroda, Bank of India, Indian Bank and Bank of Maharashtra, which have largely been comfortable on deposit mobilization over the past year, saw on-year growth in loans outpacing deposits. Loan growth for these lenders was in the range of 11-14% whereas deposits were 8-10% higher on year.