Banking sector: After short respite, deposits fail to keep up with advances

MUMBAI: After briefly catching up with , bank deposit growth has again begun to lag advances. Early business updates from banks for the September quarter show a mixed trend, with some lenders-such as HDFC Bank-deliberately slowing credit expansion to maintain balance sheet stability.

According to , deposits of scheduled commercial banks grew 10.4% at the end of the first quarter, while credit rose 11%. In the preceding quarter, deposit growth stood at 10.3% versus 10.4% for credit.

Provisional figures filed by banks show that for Bank of Baroda and Kotak Bank, growth in advances continues to outpace deposit mobilisation, while for HDFC Bank and Yes Bank deposits are the focus of growth. IndusInd Bank was an outlier, reporting declines in both deposits and advances.

HDFC Bank reported period-end deposits of Rs 28lakh crore as of September 30, up 12.1% year-on-year, while advances under management grew at a slower 8.9% to Rs 28.7lakh crore. The bank's gross advances stood at Rs 27.7lakh crore, up 9.9% year-on-year.

Kotak Mahindra Bank reported robust double-digit growth, with deposits rising 14.6% to Rs 5.3 lakh crore and advances up 15.8% to Rs 4.7 lakh crore.

Among public sector lenders, Bank of Baroda's global deposits grew 9.3% year-on-year to Rs 15 lakh crore, while global advances increased 11.9% to Rs 12.8 lakh crore, taking its total global business to Rs 27.8 lakh crore-up 10.5% over the previous year.

IDBI Bank saw deposits rise 9% to Rs 3 lakh crore and advances grow 15% to Rs 2.3 lakh crore, resulting in a 12% increase in total business to Rs 5.3 lakh crore. Yes Bank reported moderate growth, with deposits at Rs 3 lakh crore, up 7.1% year-on-year, and loans at Rs 2.5 lakh crore, up 6.5%. Its CASA deposits grew 13.2% to Rs 1 lakh crore, improving its funding mix.

IndusInd Bank's deposits fell 5% year-on-year to Rs 3.9 lakh crore, while net advances declined 8% to Rs 3.3lakh crore. The bank's CASA ratio was 30.8%.

The data shows the challenge banks continue to face in mobilising low-cost deposits after a 100 basis point cut in interest rates by the RBI.

With lending continuing to grow faster than deposits, competition for funds is likely to keep deposit rates sticky in the coming quarters.