Banking Sector Q1 FY26 Business Updates

Industry-Wide Trends and Outlook: Despite RBI easing liquidity (surplus from April 2025), deposit growth is anticipated to remain challenging for banks due to falling deposit rates following repo rate cuts. Net Interest Margin (NIM) Pressure: NIMs are expected to decline in H1 FY26. This is driven by a faster reduction in the yield on advances compared to the cost of funds. Repo Rate Impact: A total 100 bps cut in the repo rate (25 bps in February, 25 bps in April, and 50 bps in June 2025) will lead to a downward re-pricing of EBLR-linked loans. CD Ratio Dynamics: Private banks generally saw an improvement in their CD ratios. Small Finance Banks (SFBs) witnessed a meaningful improvement in their CD ratios. Public Sector Banks (PSBs) operate with a significantly lower CD ratio compared to private banks and observed a flattish to marginal increase in their ratios. Performance by Select Banks & NBFCs: HDFC Bank: Achieved strong deposit growth of 16% YoY by June '25, indicating market share gains. Advances growth stood at 6.7% YoY (June '25) Deliberately pursued slower loan growth to improve its CD ratio, which positively adjusted from 105% in June '24 to 96% by June '25 end. CSB Bank: Experienced strong loan growth of 36% YoY, driven primarily by a 32% YoY surge in gold loans Deposit growth lagged at 20% YoY, leading to an increase in its CD ratio from 84% in June '24 to 92% in June '25. Bandhan Bank: Showed a significant improvement in its CD ratio. Reported mid-single digit advances growth. Maintained strong deposit growth. IndusInd Bank: Experienced a weak Q1 FY26 in terms of both advances and deposits. Managed liquidity by letting go of some corporate loans. NBFCs (Non-Banking Financial Companies): Bajaj Finance: Posted 25% YoY growth in assets. Bajaj Housing Finance: Reported 24% YoY growth in assets. Mahindra Finance: Saw an Asset Under Management (AUM) growth of 15% YoY.