Amid funding pressure, banks tap wider pool for credit expansion

Mumbai : Bank earnings in FY26 are set to shift from margin-led gains to volume-driven growth, even as funding pressures intensify with banks increasingly tapping costly wholesale sources to sustain credit expansion. According to data released by RBI, system-level advances grew 13.8% as of March 15, outpacing deposit growth of 10.8%, widening the gap between loans and liabilities. This divergence has intensified competition for funds, pushing banks to rely more on high-cost certificates of deposit, whose issuances have surged to record levels.A report by Systematix Research noted that the credit-deposit ratio has risen to around 83% in March from 81.7% in Dec 2025. This has forced banks to depend on wholesale funds. The report added that fresh certificate of deposit issuances jumped 46% year-on-year during the quarter, reflecting growing funding pressure.Banks’ business updates released over the weekend reinforce this trend, with most banks reporting faster credit growth than deposit accretion. The only exceptions were HDFC Bank and Yes Bank, where deposit growth exceeded loan expansion. Bank of India, Kotak Mahindra Bank and Yes Bank posted double-digit balance sheet growth in FY26, while IndusInd Bank reported contraction, highlighting divergent funding strategies and balance sheet adjustments across lenders.

The strong double-digit credit growth reflects continued economic momentum, with retail, agriculture and MSME segments driving loan demand. Bank of India reported global advances rising 15.7% year-on-year to Rs 7,70,566 crore, while deposits grew 13.6% to Rs 9,27,460 crore, pushing its credit-deposit ratio to 83.1% from about 81.6% a year earlier. Kotak Mahindra Bank saw net advances increase 16.2% to Rs 4,95,892 crore and deposits rise 14.7% to Rs 5,72,457 crore, with its credit-deposit ratio inching up to 86.6% from around 85.5%.Yes Bank stood out with stronger deposit mobilisation, as deposits grew 12.1% to Rs 3,18,970 crore, outpacing loan growth of 10.7% to Rs 2,72,454 crore.