PSU banks start FY27 strong, deposits lag loan growth

Public sector banks (PSBs) started FY27 on a strong footing, reporting robust double-digit growth in advances during the first quarter, although deposit mobilisation continued to lag loan growth, signalling pressure on funding resources.

Provisional business disclosures from nine of the 12 state-owned lenders for the quarter ended June 30 showed loan growth ranging from nearly 12% to 29% year-on-year, while deposit growth remained comparatively slower at 3.5% to 16%. 

The trend reflects sustained credit demand despite weaker liability mobilisation.Retail lending remained the key growth driver, supported by steady expansion in agriculture and MSME segments. However, low-cost current account and savings account (CASA) deposits continued to remain under pressure across lenders.

Bank of Baroda reported a 17.4% rise in global advances against a 13.8% increase in deposits. Bank of India posted 18.64% growth in loans and 14.92% growth in deposits, while Punjab National Bank recorded 12.85% growth in advances compared with an 8.5% rise in deposits. Canara Bank reported 18% growth in loans and 11.7% growth in deposits, while Central Bank of India emerged as the fastest-growing lender, with advances surging 28.8% year-on-year.The faster pace of lending also pushed credit-deposit ratios higher across several banks. 

Punjab National Bank’s global credit-deposit ratio improved to 73.92% from 71.1% a year earlier, while UCO Bank saw its ratio rise to 82.15% from 75.38%. Pressure on CASA deposits persisted, with Union Bank of India reporting its CASA ratio easing to 35.10%. 

Analysts said maintaining deposit growth will remain critical for PSBs as credit demand stays firm through FY27.