strengthen bank deposit base

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

According to a CRISIL report, credit growth, however, remained higher than deposit growth and the system-level credit-deposit (CD) ratio remained above 81 per cent. The elevated CD ratio highlights the need for banks to strengthen their liability franchises to support future loan growth. While fixed deposits and other funding avenues can help in mobilizing deposits, relying on these sources can increase funding costs and put pressure on margins.

Therefore, banks focus on raising stable and granular current and savings account (CASA) deposits to increase funding flexibility and support sustainable balance sheet growth.

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