Axis Bank eyes stable deposit growth in FY26, hinges on liquidity support

Axis Bank's net NPAs also improved to 0.33 percent in Q4FY25 from 0.35 percent in Q3FY25

As Axis Bank posted better-than-expected results for the March quarter (Q4FY25), the management, during their analyst conference call, said they expect deposit growth to improve in FY26, provided liquidity support in the system remains intact.

“If liquidity in the system remains healthy during this financial year, and if that liquidity continues to support deposit inflows, then we believe we have the franchise strength to grow retail assets meaningfully,” said Amitabh Chaudhary, CEO of Axis Bank.

Recently, the Reserve Bank of India (RBI) announced a smaller-than-expected increase of 2.5 percentage points in the run-off factor for banks’ retail deposits that are enabled with internet and mobile banking. This was lower than what was initially proposed.

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According to the RBI, this change is expected to lead to a 600 basis point improvement in the overall Liquidity Coverage Ratio (LCR) for the banking sector. The implementation of the new LCR rules has also been deferred by one year, from April 1, 2025, to April 1, 2026, giving banks more time to prepare.

That said, Axis Bank did not provide any specific guidance on how these LCR changes would impact their deposit book in the future.

“At this point, based on our existing deposit stock, we believe the net impact will be broadly neutral,” said Chaudhary. “Of course, the actual impact will depend on how the composition of deposits looks by April 2026, which is hard to predict right now. But as of today, we don’t anticipate any negative consequences from the LCR changes, and we’ll continue to analyse this in more detail going forward.”

For the quarter ended March, Axis Bank’s total deposits grew by 10 percent year-on-year, while its advances rose 8 percent over the same period. Net interest income for the quarter increased by 6 percent year-on-year to Rs 13,811 crore. However, net profit saw a marginal decline of 0.1 percent year-on-year to Rs 7,117 crore.

In terms of asset quality, the bank showed a slight improvement. Gross non-performing assets (NPAs), as a percentage of total advances, came in at 1.28 percent at the end of the March quarter, compared with 1.46 percent in the previous quarter. Net NPAs also improved to 0.33 percent, down from 0.35 percent in the December quarter.