Private banks beat PSBs on deposit growth in Q1FY26, per provisional data

Banks

Though stress on deposit mobilisation persists, private lenders have trumped state-owned ones on this front in the June '26 quarter, according to provisional numbers.

Private banks have reported deposit growth in the range of 1.6-4.5 percent on-quarter in Q1FY26, compared to 0.7-1.7 percent for PSU banks.

Similarly, private banks’ deposit growth ranged between 4.1-20.3 percent in Q1FY26

(on-year), compared to 7-14.1 percent for state-owned lenders.

In advances too, private banks were ahead with on-quarter growth of 0.4-5.8 percent versus 0.5-2.3 percent growth for public sector banks (PSBs).

CASA stress

Despite this, tepid growth in current and savings account (CASA) deposits has sustained in the April-June quarter.

Banks have been struggling with deposit mobilisation over the last few quarters, especially on the CASA front, due to unattractive interest rates relative to other financial products.

Nonetheless, banks, especially PSBs, have been able to manage the CASA deposit ratio as per the guided level or slightly lower, thanks to the introduction of innovative products.

Stress on CASA deposits increased after the central bank slashed the repo by a full 1 percent, leading to banks also lowering rates on these deposits. The RBI (Reserve Bank of India) cut the policy rate to support growth.

Per data compiled by Ashika Institutional Equities Research, the CASA ratio has declined by 1.5-6 percent for most banks.

Q1FY26 preview

According to brokerage firms, the profitability of banks in the first quarter of the current financial year is expected to remain under pressure due to margin compression, weak fee income, and elevated credit costs.

Some brokerages expect bank profits to grow modestly, in the range of 3-4 percent on-year. Others expect a decline on a quarterly basis. However, the decline in profitability can be offset by higher treasury gains, the brokerages added.