Banks' Q4 loan growth slows on persistently tight liquidity

Banking system liquidity was estimated to be in deficit by ₹1.5-3 trillion in the January-March quarter

- Anshika Kayastha

Loan and deposit growth slowed sequentially for several banks in the fourth quarter ended December even as margins came under pressure. While the last quarter of a financial year typically sees accelerated growth, lenders faced some pressure in Q4 FY25 due to persistent tightness in system liquidity, lagging deposit growth and 25-basis-point rate cut by the Reserve Bank of India in the first week of February.

Loan growth for Punjab National Bank, Bank of India, IDFC First Bank, Yes Bank, Bandhan Bank, IDBI Bank and South Indian Bank declined to 8-20% year-on-year from 12-22% in the previous quarter, according to data compiled by Mint from per-quarter provisional updates of the banks.

Following the rate cut, outstanding weighted average lending rate of banks fell to 9.78% in February from 9.85% in the previous month, according to the latest RBI data. The outstanding weighted average term deposit rate, on the other hand, was unchanged at 7.02%.