Mid-tier private banks including IDFC First, Bandhan, and Federal Bank reported improved low-cost deposit ratios for the June quarter. This shift highlights a divergence from major private lenders, who faced declines in their Current Account Savings Account (CASA) ratios. Improved CASA ratios generally lower a bank's cost of funds, which can help in protecting net interest margins amid a competitive environment for deposits.
In the June 2026 quarter, several mid-sized private banks managed to increase their share of low-cost deposits, often called Current Account Savings Account (CASA) ratios, even as their larger competitors struggled to maintain similar levels. This trend is significant for investors because a higher CASA ratio typically means a bank is paying less interest on its total deposits, which supports better profitability.
IDFC First Bank led the group, reporting a CASA ratio of 50.8% for the quarter, an increase of 280 basis points compared to the same period last year. Management noted that this achievement is the result of a multi-year strategy that prioritized building a stable deposit base over rapid loan book growth. Similarly, Bandhan Bank saw its ratio rise by 234 basis points to 29.4%, and Federal Bank reported a 188 basis point increase to 32.23%. Federal Bank’s leadership attributed this growth to a strategic pivot in branch-level performance goals, focusing more on attracting new deposit customers.
Diverging Trends in Private Banking
While mid-tier banks saw gains, the country's largest private lenders faced pressure on their low-cost deposit metrics. HDFC Bank, Axis Bank, Kotak Mahindra Bank, and ICICI Bank all recorded sequential or year-on-year declines in their CASA ratios. For HDFC Bank, the ratio stood at 32.3%, while Axis Bank reported a drop of approximately 200 basis points. ICICI Bank and Kotak Mahindra Bank also saw their figures moderate during the quarter.
This performance is notable when looking at a five-year window from June 2023 to June 2027. Over this longer period, most major banks, including HDFC Bank and Kotak Mahindra Bank, have seen significant erosion in their CASA ratios as customers moved money into higher-interest-bearing fixed deposits or alternative investments. Among the ten major banks analyzed, only IDFC First Bank and YES Bank managed to improve their CASA ratios over this five-year timeframe.
Why Deposit Mix Matters for Investors
For banking investors, the cost of funds is a critical metric. When banks rely more on low-cost savings and current accounts, they do not need to depend as heavily on expensive bulk deposits to fund their lending activities. This provides a buffer for net interest margins, especially when market interest rates remain elevated or volatile.
However, sustaining these gains in a highly competitive banking sector remains a challenge. The key monitorable for investors will be whether these mid-tier banks can maintain these CASA levels as they scale their loan books further, and whether the larger banks can reverse their declining trend through new customer acquisition strategies or technological improvements in their digital banking platforms. Investors may also track management commentary on how they plan to balance the cost of deposits with the ongoing demand for credit across their retail and corporate segments.