Indian Banks: Credit Growth Outpaces Deposits; CASA Ratio a

Analysts forecast that credit growth for Indian banks will continue to exceed deposit growth in fiscal 2027, with credit growing 12-14% and deposits 10-12%. This extends a trend observed for over a decade. While new liquidity norms might help, declining CASA (Current Account Savings Account) ratios are a concern.

The persistent gap between credit and deposit growth means banks have to rely more on costlier wholesale funding, which can compress Net Interest Margins (NIMs). Declining CASA ratios further exacerbate this, as CASA deposits are typically low-cost funding sources, directly impacting bank profitability.

This trend presents a mixed picture for the banking sector. While strong credit growth is positive for asset expansion, the funding challenge could pressure profitability for all banks (e.g., HDFCBANK, ICICIBANK, SBIN). Banks with a robust and growing CASA base will be better positioned to manage NIMs. Public sector banks might face greater challenges due to their often lower CASA ratios.

Traders should closely monitor individual banks' quarterly results for NIM trends, CASA ratio movements, and commentary on funding costs. Look for banks that are actively growing their deposit base, especially CASA, and those with diversified funding sources. The effectiveness of revised liquidity norms in bridging this gap will also be a key watch point.

• •Bank credit growth set to outpace deposit expansion in FY27.
• •Analysts predict credit growth 12-14%, deposits 10-12%.
• •Credit has consistently grown faster than deposits for over a decade.
• •Revised liquidity norms may help manage the gap.
• •Declining CASA ratios are a concern, impacting bank profitability.