New Delhi: India’s dozen public sector banks continued to lag private lenders in average deposit growth in FY26, according to the government’s internal performance benchmarking analysis reviewed by Mint.
State-run banks reported an average deposit growth of 10.6% compared with 13.4% of private banks. Their average current account growth of 4.5% was significantly lower than the 13.1% growth reported by private sector banks. Savings account deposits grew 9.7% compared with 10.3% for private banks.
India's largest lender State Bank of India (SBI) posted an 11.0% growth in global deposits in FY26, broadly in line with its public sector peers' average of 10.6%. While SBI's current account growth of 4.5% matched the state-owned banks' average, it remained well below the 13.1% average recorded by the private sector banks, highlighting scope for stronger Casa (current accounts and savings accounts) mobilization.
Among private lenders, HDFC Bank recorded deposit growth of 14.4% during FY26, followed by Axis Bank at 13.9% and ICICI Bank at 11.4%. Indian Overseas Bank emerged as the fastest-growing public sector bank in terms of overall deposits, registering an 18% growth. It was followed by Bank of Maharashtra (14.1%), Bank of India (13.6%) and Central Bank of India (13.4%), the analysis showed.
Current account balances declined 20% at Canara Bank, 6.2% at Indian Overseas Bank and 2.7% at Union Bank of India during FY26. Bank of Maharashtra reported the strongest current account growth at 24.8%, followed by Punjab & Sind Bank at 20.2%, Bank of Baroda at 12.9% and Indian Bank at 12.2%, the analysis showed.
The average savings account growth of private banks at 10.3% was broadly similar to that of PSU banks at 9.7%, but they significantly outperformed in current account growth, reflecting stronger traction in acquiring salaried customers, small and medium enterprises and corporate operating accounts.
Casa ratio
Public sector banks maintained a marginally stronger low-cost deposit base. Their average Casa (current account savings account) ratio was 38.2%, marginally higher than the 37.4% reported by private banks. Bank of Maharashtra recorded the highest Casa ratio among PSBs at 52.5%, followed by Central Bank of India at 47.2%, Indian Overseas Bank at 41.5% and Bank of Baroda at 38.9%.
Current account deposits (zero or very low interest) and savings accounts (low interest) form low-cost liabilities. A higher CASA ratio lowers a bank’s cost of funds, expands net interest margins and boosts profitability without needing higher lending rates.
The exercise pointed to the dependence on bulk deposits – single term deposits of ₹3 crore and above—across lenders, with Bank of Maharashtra deriving 23.8% of its deposits from bulk deposits, followed by Canara Bank at 22.2% and Union Bank of India at 21.2%. Indian Overseas Bank had the lowest bulk deposit share at 5.7%, indicating a relatively stronger granular deposit franchise.
“Public sector banks need to sharpen their focus on current account mobilization as they continue to trail private sector banks on this key liability metric, while also reducing reliance on bulk deposits to improve the quality and stability of their deposit base,” a senior banker said, requesting anonymity.
"PSBs (public sector banks) haven’t yet focused on cross-selling of their products the way private sector banks have… Large PSBs, given their reach and presence, have the potential to outdo the private sector but what they need is flexibility and focused approach in cross-selling of their products including salary accounts," said Mukesh Chand, a senior counsel at Economic Laws Practice.
Strong performance
The 12 public sector banks delivered a strong financial performance in FY26, driven by robust business growth, improved asset quality and record profitability. Aggregate business rose 12.8% to ₹283.3 trillion as of 31 March, with deposits increasing to ₹156.3 trillion and advances growing 15.7% to ₹127 trillion.
Net profit rose 11.1% to a record ₹1.98 trillion, marking the fourth consecutive year of profitability for PSBs. Their capital position remained strong, with the aggregate capital adequacy ratio improving to 16.6%, well above the regulatory requirement of 11.5%.
Experts said India’s banking landscape has changed.
“There has been a market shift in liabilities from public sector banks to private banks in the recent past. This was since private banks were focussed on deposits while public sector banks had market-leading business growth on the advances side,” said Sanjay Agarwal, senior director at CareEdge Ratings.
Queries emailed to the banks as well as spokespersons of the finance ministry, the Reserve Bank of India and the Indian Banks' Association remained unanswered.