Q4 FY26 updates: Banks see double-digit credit and deposit growth; SMF banks excel

The Q4FY26 earnings season is around the corner, with major IT companies like TCS and Infosys releasing their results starting this week. However, a few sectors and stocks are already buzzing in trade due to the early updates released for Q4. Sectors like Banks, consumer durable companies, real estate developers, and automobile manufacturers announced the early updates for the quarterly sales. Among all, banks are in major focus as they have corrected nearly 30% from the record high levels. The NIFTY Bank index is down 19% from the record high levels, suggesting sharp selloff amongst bank. Here are key takeaways’ from Q4FY26 business updates from leading banks.

All round superior credit growth

The Q4FY26 witnessed strong and all round growth in lending portfolio across the categories. From public and private sector banks to small finance banks, all banks reported high-double digit growth in lending, bringing back the buoyancy in the banking sector. All the major private sector banks like HDFC Bank, Axis Bank, ICICI Bank, Kotak Mahindra Bank posted a credit growth of 12-16% YoY, barring IndusInd Bank which posted a decline of 8.7% YoY. Similarly, the public sector banks like Bank of Baroda, Bank of Maharashtra, Bank of India, Union Bank of India posted similar high double digit growth for the quarter, with Bank of Maharashtra posting the highest advances growth of 22% YoY.

The strong and high double digit growth by majority of the public and private sector banks highlights the strong offtake of credit capacity in the economy. The growth can be attributed judicious portfolio of banks focusing on retail, corporate and agri sector. Public sector banks focused on retail credit to aid the growth for this quarter. Where as private sector banks focused on maintaining judicious mix of the portfolio.

Small Finance Banks outperform

The small finance bank category has seen strong structural changes in recent quarters, which has resulted into robust credit growth for the key leaders in small finance banks. AU Small Finance Bank, Ujjivan Small Finance Bank, Suryoday Small Finance posted credit growth in excess of 24% YoY for the Q4FY26. Small Finance Banks have started moving towards more secured lending portfolio despite RBI relaxation on the unsecured lending part, which marks as a strategic shift from the traditional unsecured heavy lending portfolio.

Strong deposit franchise

On the deposits front, all banks are now piling up for creating liquidity and focusing on higher deposit growth in comparison to lending growth. All major private sector banks like HDFC Bank, Kotak Mahindra Bank, Axis Bank, the deposit growth stood at nearly 15%. While small banks like Yes Bank, UCO bank posted 10% growth in deposits. HDFC Bank after the merger of HDFC Ltd is struggling on maintaining healthy credit-deposit ratio, which resulted into higher deposit growth at 14.4% vs 12.0% lending growth during the quarter. Where as Kotak Mahindra Bank are comfortably growth the lending book at 16% YoY with a deposit growth of 14.4%.

The public sector banks have maintained their superiority in the credit deposit ratio, where private sector banks are struggling maintain the healthy credit-deposit ratio. For the Q4FY26, public sector banks have shown deposit growth of up to 15%, lower than the lending growth rate.

Conclusion

The key takeaway from the early updates for Q4FY26 suggests, the banks back to consistent double-digit credit growth, which is a healthy sign for the sector. Secondly, the public sector banks's have seen sharp rallies in comparison to its private peers owing to its healthy portfolio and favourable credit-deposit ratio. Where as private sector banks are picking up the chase by product diversification and expanding into to different lending categories. However, the impending inflationary scenario could prove to be hindrance in the credit growth if RBI decides to change its stance on the monetary policy.