Mumbai: Banks reported modest loan growth in the September quarter, broadly in line with the system-wide expansion of around 10.5%, while deposit growth remained resilient despite recent rate cuts.
Provisional data for the quarter showed that HDFC Bank's advances rose 9.9% year-on-year to ₹27.69 lakh crore as of the end of September, while deposits grew 12.1% to ₹28 lakh crore. Kotak Mahindra Bank's loan book expanded 15.8% to ₹4.62 lakh crore, and deposits increased 14.6% to ₹5.28 lakh crore.
Among state-run lenders, Punjab National Bank's loan book grew 10.7% to ₹11.19 lakh crore, while deposits rose 10.4% to ₹15.63 lakh crore. Bank of Baroda reported a 11.49% year-on-year rise in advances to ₹10.46 lakh crore, with deposits up 9.66% to ₹12.71 lakh crore.
Analysts expect credit growth to pick up in the December quarter, supported by festive season demand and the recent GST rate cuts.
"A pickup in consumption activity, led by GST rate cuts and income tax relief, alongside lower borrowing costs, will drive a gradual recovery in loan demand in the second half of the financial year," said Nitin Aggarwal, head of BFSI at Motilal Oswal Securities.
The brokerage expects overall growth trends to remain modest in the September quarter but projects system-wide credit growth to sustain at 11% year-on-year for FY26 and improve to 12.5% in FY27. Deposit growth is expected to hold steady at around 10% in FY26.
According to Reserve Bank of India ( RBI) data, system credit growth edged up to 10.3% year-on-year as of September 5, compared with 10% as of August 22, while deposit growth moderated to 9.8% from 10.2% over the same period. The system credit-deposit ratio remained elevated at 79% as of September 2025.
Sectoral deployment data showed retail loans rising 11.8% year-on-year as of August, while MSME credit growth moderated to 18.5%. Industrial loans showed improvement, growing 6.5% year-on-year.
Analysts said credit demand remains muted despite strong capital positions across banks.
"The real challenge today is lack of demand and not lack of capital," said Suresh Ganapathy, India head - financials at Macquarie Capital. "Banks are sitting on excess capital but not wanting to lend. At an aggregate level, the banking system CET1 of 12% plus will be the best seen in ages in India, so banks are very well capitalised."
Macquarie expects overall credit growth to recover from the current sub-10% levels to about 11% by FY26.
Provisional data for the quarter showed that HDFC Bank's advances rose 9.9% year-on-year to ₹27.69 lakh crore as of the end of September, while deposits grew 12.1% to ₹28 lakh crore. Kotak Mahindra Bank's loan book expanded 15.8% to ₹4.62 lakh crore, and deposits increased 14.6% to ₹5.28 lakh crore.
Among state-run lenders, Punjab National Bank's loan book grew 10.7% to ₹11.19 lakh crore, while deposits rose 10.4% to ₹15.63 lakh crore. Bank of Baroda reported a 11.49% year-on-year rise in advances to ₹10.46 lakh crore, with deposits up 9.66% to ₹12.71 lakh crore.
Analysts expect credit growth to pick up in the December quarter, supported by festive season demand and the recent GST rate cuts.
"A pickup in consumption activity, led by GST rate cuts and income tax relief, alongside lower borrowing costs, will drive a gradual recovery in loan demand in the second half of the financial year," said Nitin Aggarwal, head of BFSI at Motilal Oswal Securities.
The brokerage expects overall growth trends to remain modest in the September quarter but projects system-wide credit growth to sustain at 11% year-on-year for FY26 and improve to 12.5% in FY27. Deposit growth is expected to hold steady at around 10% in FY26.
According to Reserve Bank of India ( RBI) data, system credit growth edged up to 10.3% year-on-year as of September 5, compared with 10% as of August 22, while deposit growth moderated to 9.8% from 10.2% over the same period. The system credit-deposit ratio remained elevated at 79% as of September 2025.
Sectoral deployment data showed retail loans rising 11.8% year-on-year as of August, while MSME credit growth moderated to 18.5%. Industrial loans showed improvement, growing 6.5% year-on-year.
Analysts said credit demand remains muted despite strong capital positions across banks.
"The real challenge today is lack of demand and not lack of capital," said Suresh Ganapathy, India head - financials at Macquarie Capital. "Banks are sitting on excess capital but not wanting to lend. At an aggregate level, the banking system CET1 of 12% plus will be the best seen in ages in India, so banks are very well capitalised."
Macquarie expects overall credit growth to recover from the current sub-10% levels to about 11% by FY26.
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