Loan Growth Accelerates in Q1, While Deposit Growth Remains Sluggish

In the June 2026 quarter, Indian banks reported strong credit growth, with several institutions recording substantial increases in advances. Notably, some banks, including Bank of Baroda, IDBI, and RBL Bank, experienced a decline in deposits, leading to a widening gap between credit growth and deposit inflows.

Public sector banks demonstrated a more stable credit-deposit growth ratio compared to their private counterparts, which were seen adjusting their liabilities to align with this dynamic market scenario. Contributing to the heightened loan demand were factors such as the introduction of a new credit guarantee scheme designed to bolster lending, as well as ongoing challenges within supply chains that have necessitated financial support for businesses.

As banks navigate this landscape, it will be critical for financial institutions to balance their lending strategies with deposit mobilization to ensure sustainable growth and liquidity. The performance of banks in the coming quarters will likely depend on macroeconomic trends, regulatory developments, and their ability to address the evolving needs of borrowers.