Public sector banks begin FY27 with strong loan growth as deposits trail

Public sector banks started the first quarter of FY27 on a strong footing, reporting double-digit growth in advances, but deposit mobilisation seemed to be trailing the jump in loans.

Retail loans remained the key growth engine even as low-cost CASA deposits stayed under pressure.

Provisional business disclosures, compiled by PTI, by nine of the 12 state-owned lenders for the quarter ended June 30, showed loan growth ranging from around 12 per cent to nearly 29 per cent year-on-year compared to deposit growth of 3.5-16 per cent, reflecting sustained credit demand despite a slower pace of liability mobilisation.

Among the major lenders, Bank of Baroda reported a 17.4 per cent year-on-year rise in global advances against a 13.8 per cent increase in deposits, while Bank of India posted 18.64 per cent loan growth and a 14.92 per cent rise in deposits. Punjab National Bank’s advances grew 12.85 per cent year-on-year compared to an 8.5 per cent increase in deposits.

Canara Bank reported 18 per cent growth in loans and an 11.7 per cent rise in deposits, while Indian Bank recorded 13.9 per cent loan growth and a 13.3 per cent jump in deposits. Central Bank of India emerged as the fastest-growing lender in the group, with advances rising 28.8 per cent year-on-year against an 11.7 per cent expansion in deposits.

UCO Bank reported a 21.3 per cent rise in advances and an 11 per cent increase in deposits, and Punjab & Sind Bank posted 19.5 per cent loan growth and a 12.2 per cent rise in deposits.

Union Bank of India stood out for relatively weak deposit mobilisation, with the component growing just 3.5 per cent year-on-year, even as advances increased 12.5 per cent.

Retail, agriculture and MSME (RAM) loans continued to drive credit expansion across lenders.

Canara Bank reported the highest growth among peers, with domestic RAM advances rising 21.3 per cent year-on-year, followed by Bank of India at 19.7 per cent and Bank of Baroda at 18.5 per cent. Indian Bank’s RAM portfolio grew 14.8 per cent, while Union Bank’s expanded 11.56 per cent.

The faster pace of lending compared to deposit growth also resulted in a further rise in credit-deposit ratios at several lenders.

Punjab National Bank’s global credit-deposit ratio improved to 73.92 per cent from 71.1 per cent a year earlier, while UCO Bank’s ratio rose to 82.15 per cent from 75.38 per cent.

Union Bank’s domestic credit-deposit ratio also increased sharply to over 83.38 per cent.

Meanwhile, the pressure on low-cost deposits persisted. Union Bank’s CASA ratio declined marginally to 35.10 per cent from 35.51 per cent a year ago, while Central Bank of India’s CASA ratio fell to 46.61 per cent from 46.88 per cent.

Indian Bank’s domestic CASA ratio also eased to 39.64 per cent from 39.67 per cent at the end of March.