Banks continue to battle with slow growth in deposits in June quarter

The performance on mobilizing low-cost current account - savings account (CASA) deposits wasn't very encouraging either. CASA of many top lenders saw a sequential drop in Q1 FY25

Worry over a sustained slowdown in deposit accretion in banks looks far from over with some of the top lenders recording a sequential decline in deposits in the June quarter of FY25. Provisional numbers of at least 13 banks for the quarter revealed ​a 1.15 percent drop in deposits compared to the March quarter of last fiscal.

Bank of Maharashtra, for instance, recorded total deposits of Rs 2.67 lakh crore in Q1FY25, down 1 percent from Rs 2.70 crore in Q4FY24. Likewise, Yes Bank’s total deposits declined 0.75 percent to Rs 2.64 lakh crore from Rs 2.66 lakh crore in the same period.

Bandhan Bank recorded the steepest decline in deposits among the lenders that have revealed their provisional data for Q1FY25 (see table). Its deposits dropped 1.5 percent to Rs 1.33 lakh crore at the end of June 2024 from Rs 1.35 lakh crore by three months to March 2024.

HDFC Bank’s show on the deposits front didn't move the Street much, with the stock already down over 4 percent in trade so far, thanks to a silver lining that the bank may not have seen an erosion in deposit base sequentially as is the case with its smaller peers. Deposits with HDFC Bank stayed flat at Rs 23.80 lakh crore in the June FY25 quarter.

Taking cues from the performance of banks so far, the Bank Nifty index traded ​1 percent down at 52573.75 on July 5.

The performance on mobilising low-cost current account - savings account (CASA) deposits wasn't very encouraging either. CASA of many top lenders saw a sequential drop in Q1 FY25. HDFC Bank’s CASA deposits for Q1FY25 stood at Rs 8.63 lakh crore, as against Rs 9.08 lakh crore, an on-quarter fall of 5 percent.

Bandhan Bank led the private lenders with the highest drop in CASA deposits at 11.1 percent to Rs 44,453 crore from Rs 50,151 crore. Yes Bank showed a 1.1 percent drop in its CASA for Q1FY25 to Rs 81,405 crore.

State-run Bank of Maharashtra’s CASA deposits too fell 6.6 percent sequentially to Rs 1.33 lakh crore in Q1FY25.

Analysts point out that while it's not a very alarming trend of deposits declining sequentially in the June quarter of a new fiscal year, it is important to note that during the pandemic years of FY20 - FY23, this wasn't the case. "After many quarters, we are witnessing such a noticeable decline in deposits on a sequential basis," said a banking analyst with a domestic brokerage. Strengthening the deposit base remains a challenge for the banks even as the repo rate seems to have stabilised, added the analyst.

Saurabh Bhalerao, associate director of BFSI at CareEdge, however believes that bank deposits, other than CASA, are showing some signs of growth. “Banks should start focusing on CASA as other deposits like time and bulk are showing signs of growth.” He added that garnering low-cost deposits could be a struggle for the banks.

Advances growth

While the show on deposits wasn't encouraging in Q1, the growth in advances continued with strong momentum.

Barring HDFC Bank, which saw a slowdown in advances growth, all the banks reported a sequential growth in their advances.

Yes Bank’s total advances grew to Rs 2.29 lakh crore in Q1FY25 from Rs 2.27 lakh crore in Q4FY24, growing by 0.88 percent. For Federal Bank, the advances grew 5.56 percent to Rs 2.24 lakh crore from Rs 2.12 lakh crore.

Bank of Maharashtra’s advances grew 3 percent to Rs 2.09 lakh crore from Rs 2.03 lakh crore in the same period.

HDFC Bank, the sole bank which reported a decline in advances, reported total advances of Rs 24.87 lakh crore in Q1FY25, a decline by 0.79 percent from Rs 25.07 lakh crore in Q4FY24.