Summary of this article
GST rate cut has boosted credit growth in banks during third quarter
Deposits in most banks lag behind loans growth
Credit growth in banks picked up in the October-December 2025 quarter on the back of rationalisation in Goods and Services Taxes (GST). Most lenders show higher growth in advances than their deposits in the quarter.
HDFC Bank, the largest private sector lender, posted almost 12 per cent growth year-on-year (y-o-y) in advances to Rs 28.40 lakh crore, according to the provisional updates by the bank for the December quarter. Meanwhile, deposits for the private lender lagged slightly behind, rising 11.50 per cent on a yearly basis to Rs 28.60 lakh crore.
Axis Bank saw its gross advances rise by 14.10 per cent y-o-y to Rs. 11.70 lakh crore by the end of the December quarter. The bank’s total deposits, as on December 31, for the quarter was Rs. 12.60 lakh crore, up 15 per cent y-o-y. Within total deposits, current and savings account deposits of the private bank was up 13.90 per cent on a y-o-y basis to Rs 4.93 lakh crore, while term deposits were up 15.80 per cent y-o-y to Rs 7.68 lakh crore.
Meanwhile, Kotak Mahindra Bank posted a 16 per cent growth in net advances y-o-y to Rs. 4.80 lakh crore during the quarter, while its deposits rose by 14.60 per cent y-o-y to Rs 5.42 lakh crore.
The change in dynamics with higher growth in credit over deposits was also due to the steady rate cuts by the Reserve Bank of India (RBI) in 2025. The RBI’s monetary policy committee (MPC) had affected a cumulative 125 basis point (bps) cut in key policy rates from February-December 2025. This along with the cuts in GST rates which came into effect in September led to sharper rise in loans across most banks.
Within public sector lenders too, Punjab National Bank (PNB) saw its domestic advances rise 10.20 per cent y-o-y to Rs 11.67 lakh crore, while its domestic deposits rose 8.30 per cent to Rs. 15.97 lakh crore. Bank of Baroda posted 13.50 per cent increase in advances by the end of December to Rs. 10.95 lakh crore, while Union Bank’s advances grew 7.40 per cent y-o-y.
Market analysts forecast firm profits for banks in the Q3 FY 26. Several top brokerage reports have also estimated that the performance of Indian banks in the third quarter could pick up after weaker growth in the first two quarters of FY 26.
However, brokerages have also said that deposits for banks will remain a key pressure point, with some deposits yet to be repriced after rate cuts made till December.
In this situation, larger banks with higher deposits were seen to be better positioned to generate broader profit margins, they said.
“Liabilities could become assets in FY27,” Elara Capital said in a report, adding that growth in large private and public sector banks will pick up.
