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Loan Growth Outpaces Deposits in Q3 as Indian Banks Face Liability Squeeze

Rising credit‑deposit ratios are sharpening the contest for deposits, steering investors toward smaller lenders showing faster expansion.

Overview

  • An aggregation of provisional updates shows loans up about 12.6% year on year versus 10.3% for deposits in Q3 FY26, lifting the system credit‑deposit ratio to 81.6% by Dec. 15.
  • Shares of several small finance and mid‑sized banks rallied after updates, while HDFC Bank fell over 2% to a three‑month low and its ADR slid 6.3% as deposit trends and a near‑100% credit‑deposit ratio drew scrutiny.
  • Bank of Baroda reported 14.6% growth in global advances and 10% in deposits; Kotak Mahindra Bank’s loans rose 16% versus 14.6% for deposits; Bank of Maharashtra logged 19.6% credit growth and 15.3% deposit growth.
  • HDFC Bank’s provisional update showed gross advances up 11.9% and average deposits up 12.2%, with slower CASA growth prompting concern about funding costs and mix.
  • IndusInd Bank posted a 13.1% decline in net advances, a 3.8% drop in deposits, and a CASA ratio of 30.3%, with News18 noting the bank is under SFIO investigation related to earlier disclosed accounting lapses.