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.