The Bad PlaceTimes of India | Loans outrun deposits, margins dip
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Indian banks are facing a paradox in which credit growth (about 16% system‑wide) is exceeding deposit growth (around 12.3%), yet net interest margins are being squeezed. The traditional low‑cost funding source—current‑account and savings‑account (CASA) balances—is shrinking as savers move money into equities, mutual funds, gold and real‑estate, forcing banks to rely increasingly on costlier retail term and bulk deposits. Both SBI and Bank of Baroda have reported double‑digit growth in term‑deposit volumes (roughly 14‑15%), but the higher rates paid on these funds are raising overall funding costs and compressing margins. Executives from SBI and Bank of India acknowledge a structural shift in the “colour” of deposits, with funds flowing out of the banking system into other asset classes, intensifying competition for high‑quality borrowers and putting additional pressure on profitability.
