Banking System Loan-to-Deposit Ratios Hit Record 81% in December Quarter
The Banking System's loan-to-deposit ratio reached a record 81% in the December quarter, with HDFC Bank's LDR approaching 100% as loans grew 12% while deposits increased 11.50%. Public sector banks like Bank of Baroda and Punjab National Bank showed similar patterns of faster credit growth compared to deposit mobilization. Industry experts warn that sustained high LDRs may force banks to raise deposit rates or limit their ability to pass on RBI rate cuts.
*this image is generated using AI for illustrative purposes only.
The Banking System faces mounting pressure as loan-to-deposit ratios (LDRs) reached an all-time high of 81% in the December quarter, reflecting a persistent divergence between credit growth and deposit mobilization across the sector.
HDFC Bank Performance Highlights Sector Trends
HDFC Bank, the country's largest private-sector lender, exemplified the sector-wide challenge with its LDR edging back towards the 100% mark. The bank's performance in the December quarter showed:
| Metric | December Quarter | Growth Rate |
|---|---|---|
| Gross Advances | ₹28.44 lakh crore | 12% YoY |
| Total Deposits | ₹28.59 lakh crore | 11.50% YoY |
| Previous Deposit Growth (June Quarter) | - | 16% YoY |
Pranav Gundlapalle, head of India financials at Bernstein, noted that while the recovery in loan growth and improvement in CASA growth are encouraging, headline deposit growth remains weaker than expected. Any meaningful improvement in the LDR towards management's 90% target by FY27 is now increasingly contingent on a seasonally strong pickup in deposit growth in the March quarter and sustained improvement through FY27.
Public Sector Banks Show Similar Patterns
Public sector banks demonstrated comparable trends with credit growth consistently outpacing deposit mobilization:
| Bank | Advances | Deposits | Advance Growth | Deposit Growth |
|---|---|---|---|---|
| Bank of Baroda | ₹13.44 lakh crore | ₹15.47 lakh crore | 14.57% YoY | 10.25% YoY |
| Punjab National Bank | ₹12.32 lakh crore | ₹16.60 lakh crore | 11% YoY | 8.50% YoY |
| Union Bank of India | ₹10.16 lakh crore | ₹12.22 lakh crore | 7.13% YoY | 3.40% YoY |
Private Sector Lenders Display Mixed Performance
Private sector banks showed varied performance patterns, with some maintaining better deposit-to-advance ratios:
| Bank | Advances | Deposits | Advance Growth | Deposit Growth |
|---|---|---|---|---|
| Axis Bank | ₹11.70 lakh crore | ₹12.60 lakh crore | 14.10% YoY | 15% YoY |
| Kotak Mahindra Bank | ₹4.80 lakh crore | ₹5.42 lakh crore | 16% YoY | 14.60% YoY |
| Yes Bank | ₹2.57 lakh crore | ₹2.92 lakh crore | 5.20% YoY | 5.50% YoY |
| RBL Bank | ₹1.04 lakh crore | ₹1.19 lakh crore | 13% YoY | 12% YoY |
| IndusInd Bank | ₹3.18 lakh crore | ₹3.94 lakh crore | -13.10% YoY | -3.80% YoY |
Notably, IndusInd Bank bucked the trend with both advances and deposits declining year-on-year.
NBFC Sector Shows Robust Growth
Non-banking financial companies continued demonstrating strong balance sheet expansion during the quarter:
| Company | Key Metrics | Growth Rate |
|---|---|---|
| Bajaj Finance | New loan bookings | 15% QoQ |
| Bajaj Finance | Assets under management | 22% YoY (₹4.85 lakh crore) |
| Bajaj Finance | Deposit book | ₹71,000 crore |
| Poonawalla Fincorp | AUM | 77.50% YoY (₹55,000 crore) |
| M&M Finance | Disbursements | 7% YoY (₹17,600 crore) |
| M&M Finance | Business assets | 12% YoY (₹1.29 lakh crore) |
Industry Outlook and Concerns
Suresh Ganapathy, India head-financials at Macquarie Capital, emphasized the significance of the current situation, stating that at over 81% at a system level, LDRs are now at all-time highs. He warned that if this situation persists, banks may be forced to raise deposit rates or may have limited room to pass on RBI rate cuts, both of which warrant caution.
The banking sector faces a critical juncture as the divergence between credit demand and deposit growth continues to widen, potentially impacting future lending capacity and profitability across the industry.
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