Indian banks delivered their strongest performance on record in FY26, with combined net profit reaching ₹3.94 trillion, representing a 7.47% increase from FY25. According to Business Standard analysis, public sector banks achieved ₹1.98 trillion in net profit, up 11.13% year-on-year, while private banks recorded ₹1.96 trillion, growing 4.02%. State Bank of India topped the profit charts with ₹80,032 crore net profit, followed by HDFC Bank at ₹74,671 crore and ICICI Bank at ₹50,147 crore. The performance demonstrates the sector's resilience despite ongoing digital transformation initiatives and workforce optimization strategies. Bank deposits are staging a quiet comeback as equity market volatility and muted returns from mutual funds prompt investors to reconsider the safety of fixed-income instruments. As per RBI data, bank deposits stood at ₹256.9 lakh crore as of May 15, 2026, registering a year-on-year growth of 12.2% - well above the 10% growth recorded in the corresponding period last year. According to Yes Bank's MD Vinay Tonse, "The money that was flowing out of bank deposits is slowly starting to come back. There are increasing inquiries from customers asking whether it is time to exit equities and come back to deposits, whether it is time to exit mutual funds and move back. That reversal in trend has started showing up. Markets have not been doing well, and that is perhaps driving people back towards the safety of bank deposits."
The acceleration in time deposit growth from 8.9% to 12.3% underscores the flight to fixed returns at a time when equity markets have struggled to deliver consistent gains. Time deposits rose 12.3% to ₹225.2 lakh crore and account for 87.7% of total deposits, while demand deposits grew at a slower pace of 11.4% year-on-year, moderating from 18.1% in the corresponding period last year. According to Yes Bank's MD Vinay Tonse, "The money that was flowing out of bank deposits is slowly starting to come back. There are increasing inquiries from customers asking whether it is time to exit equities and come back to deposits, whether it is time to exit mutual funds and move back." The trend reflects normalisation in low-cost deposit growth and a clear shift in customer preference toward term deposits as interest rate expectations stabilise. As per The Economic Times, "This is what I call the 'corporatisation' of retail deposits - as money moves into equity markets and other alternative assets, CASA comes under pressure and the share of high-ticket deposits goes up."
The deposit composition shows a structural shift toward high-ticket deposits, with the share of deposits of ₹1 crore and above rising from 39% in March 2019 to 46% in March 2026. According to The Economic Times, "The share of deposits of ₹1 crore and above has risen steadily from 39% in March 2019 to 46% in March 2026 - nearly half of all bank deposits now concentrated in this segment alone." As per Macquarie Capital's analysis, small depositors with balances below ₹1 lakh have seen their share shrink from 7% to just 3%, while the ₹1 lakh to ₹15 lakh bracket has declined from 38% to 33%. Suresh Ganapathy, head of financial services research at Macquarie Capital, described this as "the 'corporatisation' of retail deposits - as money moves into equity markets and other alternative assets, CASA comes under pressure and the share of high-ticket deposits goes up." This trend has implications for banks' funding strategies and deposit mobilisation challenges, particularly as for every ₹100 deposit mobilised, banks need to keep ₹3 with the banking regulator as cash reserve ratio, plus another ₹18 for government bonds under statutory liquidity ratio, leaving only ₹79 for credit.
Despite strong profitability, banks face challenges in maintaining healthy asset quality metrics. IndusInd Bank leads with just 1% net NPA, followed by Bandhan Bank at 97 basis points and DCB Bank at 89 basis points. According to Business Standard, 23 out of 31 listed banks have less than half a per cent net NPAs, indicating overall sector health. However, IndusInd Bank has the highest gross NPAs at 3.43%, followed by Bandhan Bank at 3.27% and Punjab National Bank at 2.95%. The net interest margin (NIM) varies significantly, with Bandhan Bank enjoying the highest at 6.2%, followed by IDFC First Bank at 5.75%. SBI's NIM dropped to 2.81% from 3%, while HDFC Bank's NIM was 3.38% compared to 3.46% in the previous year.
Despite strong deposit growth, banks face significant challenges in mobilising funds for credit growth. The deposit portfolio grew 11.43% while credit portfolio increased 15.36%, creating an asymmetry that requires banks to find innovative ways to attract deposits. Four banks recorded 20% or more deposit growth, led by RBL Bank at 25.3% and City Union Bank at 23.27%. Eight banks achieved 20%+ credit growth, with City Union Bank leading at 26.49% and CSB Bank at 26.47%. The Reserve Bank of India's recent dollar windows may provide relief for fund mobilisation challenges, though the structural shift toward high-value deposits continues to impact banks' traditional funding sources.
