Banks strengthen deposit base as credit growth outpaces liabilities

Crisil says banks continue to prioritise CASA mobilisation as credit growth outpaces deposits and competition for retail funds keeps funding costs under pressure

In FY26, total deposits in India's banking sector grew 13.5 per cent year-on-year to around Rs 262 trillion, driven by liquidity infusion measures, a reduction in the cash reserve ratio, and income tax-related benefits. 

According to a Crisil report, credit growth, however, continued to outpace deposit growth, maintaining a high system-level credit-deposit (CD) ratio of more than 81 per cent. The elevated CD ratio highlights the need for banks to strengthen their liability franchises to support future credit growth. While term deposits and other funding avenues can supplement deposit mobilisation, relying on these sources may increase funding costs and put pressure on margins. 

 

Therefore, banks remain focused on mobilising stable and granular current and savings account (CASA) deposits to enhance funding resilience and support sustainable balance sheet growth. 

Notably, despite a cumulative 125 basis points (bps) reduction in the repo rate between February 2025 and March 2026, banks lowered the weighted average fresh term deposit rate by only around 48 bps, reflecting a pass-through of just around 38 per cent to depositors. The limited transmission underscores the continued competition for retail deposits and banks' focus on maintaining a stable funding base amid strong credit demand.