Q1 FY25 business update of banks: Deposits grew slower than loans

Bank of Baroda posted faster growth in advances than in deposits. The loan book of the BoB grew by 1.73 per cent while deposits improved by 1.59 per cent, sequentially

Most lenders that have reported their April-June business update posted slower growth in deposits sequentially as compared to the loan growth in the April-June quarter of 2024-25 (FY25). Current and savings account (CASA) deposits continue to face pressure.

Private sector lenders YES Bank, Bandhan Bank, and RBL Bank saw their deposit growth contract by 0.5 per cent, 1.5 per cent, and 2 per cent, respectively.

Meanwhile, Bandhan Bank and YES Bank’s advances increased by 0.7 per cent and 0.9 per cent each, while RBL Bank posted a 3 per cent growth.

Among public sector banks, Bank of Maharashtra and Punjab National Bank (PNB) reported advances growth of 2.65 per cent and 5.1 per cent, respectively. However, Bank of Maharashtra’s deposits contracted by 1.22 per cent, while PNB’s rose by 2.8 per cent.

Bank of Baroda also saw faster growth in advances than in deposits, with a loan book growth of 1.73 per cent compared to a 1.59 per cent improvement in deposits sequentially.

In a research note, analysts at Axis Securities attributed the slowdown in deposit growth to seasonal weakness typically observed in the first quarter (Q1), saying, “Following a strong showing in deposits in the previous quarter (Q4 of 2023-24/FY24), the pace of deposit accretion at a systemic level has decelerated. Deposit growth continues to lag credit growth, with systemic deposit growth at 12.6 per cent year-on-year/Y-o-Y (12 per cent Y-o-Y, excluding HDFC). However, a part of this growth momentum coming off could be attributed to the seasonal weakness generally seen in Q1.”

Meanwhile, HDFC Bank, the largest private sector lender, reported a 0.8 per cent drop in loan growth for the quarter ending June 2024, with deposit growth remaining flat compared to the previous quarter.

IndusInd Bank clocked a 1 per cent increase in loans and a 4 per cent growth in deposits.

State-owned lender UCO Bank recorded a 5.2 per cent growth in deposits, while its loan book rose marginally by 1.9 per cent.

HDFC Bank’s CASA ratio decreased to 36.29 per cent in Q1FY25 from 38.18 per cent in Q4FY24, and IndusInd Bank’s CASA ratio dropped to 36.7 per cent from 37.9 per cent.