Provisional Q1 FY27 data shows diverse loan growth trends among major Indian banks. While HDFC Bank and IDFC First Bank reported strong expansion, others faced softer growth or deposit challenges. Understanding these variations helps investors track which lenders are managing liquidity and asset growth most effectively in the current cycle.
The first quarter of the 2027 financial year has highlighted a growing divergence in how Indian banks are expanding their loan books. According to recent provisional disclosures, while the overall sector shows resilience, individual lenders are seeing varying results in loan volume and deposit gathering. This divergence is a key factor for investors to monitor, as it directly impacts a bank’s ability to generate interest income and maintain its profit margins.
HDFC Bank and IDFC First Bank have stood out in recent data. HDFC Bank reported a 3.4% sequential increase in gross loans, bringing its year-on-year growth to 15.4%. The bank also saw a 5.6% rise in average deposits, led mainly by term deposits. However, its loan-to-deposit ratio—a measure of how much of a bank’s deposit base is being lent out—reached 96.5%, suggesting that managing deposit growth will remain a priority for the bank to sustain its lending pace.
In the mid-sized category, IDFC First Bank reported a 5.2% quarter-on-quarter loan expansion and a 20.6% increase compared to the previous year. Notably, the bank saw its CASA ratio, which represents low-cost current and savings account deposits, improve by 100 basis points to 50.8%. This is a positive indicator, as higher CASA ratios generally help banks lower their cost of funds and improve net interest margins.
Sector Trends and Peer Performance
Other major banks reported more mixed results. Axis Bank recorded 2.3% quarter-on-quarter loan growth, with its CASA ratio declining to 36.9%. Meanwhile, Kotak Mahindra Bank posted a 3.3% sequential loan increase, but observed a 56 basis point drop in its average CASA ratio. IndusInd Bank returned to positive sequential loan growth of 3.3% after several quarters of stagnation, though its CASA deposits continued to trend downward. Bandhan Bank saw slower sequential growth of 0.8% as it prioritized reducing bulk deposits, while maintaining a stable microfinance collection efficiency of 98.9%.
For investors, the primary takeaway from this performance gap is the importance of deposit gathering. Banks that rely heavily on expensive bulk deposits or wholesale funding may see their profit margins pressured if deposit growth does not keep pace with lending. Monitoring the sustainability of these growth trends in upcoming quarterly earnings reports will be essential. Investors may track whether banks can improve their CASA ratios and effectively manage their loan-to-deposit ratios in the coming quarters to protect profitability.