Public Sector Undertaking (PSU) banks have started the first quarter of FY27 with a very strong performance in lending. Data from nine out of twelve state-owned banks shows that they are giving out loans much faster than they are collecting deposits. This trend shows that while people and businesses want to borrow money, they are not putting as much money into savings accounts or fixed deposits.

Loan growth among these lenders ranged from 12% to nearly 29% compared to the same time last year. In contrast, deposit growth was much slower, moving between 3.5% and 16%. The biggest driver for this boom is the 'RAM' segment, which stands for Retail, Agriculture, and MSME (Micro, Small, and Medium Enterprises) loans. These categories continue to be the main focus for bank officers across the country.

Central Bank of India emerged as the leader in growth, with its advances (loans) jumping by 28.8%, even though its deposits only grew by 11.7%. Other major players also saw big gaps. Bank of Baroda saw a 17.4% rise in loans against a 13.8% rise in deposits. Punjab National Bank (PNB) grew its loans by 12.85%, while its deposits grew by only 8.5%. Union Bank of India faced the toughest challenge, with deposits growing a tiny 3.5% despite a 12.5% increase in lending.

For bank staff, this means the pressure on the 'liability side' (collecting deposits) is increasing. Low-cost CASA (Current Account and Savings Account) deposits are under heavy pressure. The CASA ratio, which shows how much of a bank's total deposits come from these low-interest accounts, has fallen at several banks. For example, Central Bank of India saw its CASA ratio drop to 46.61%, and Union Bank saw a slight dip to 35.10%.

Because loans are growing faster than deposits, the Credit-Deposit (CD) Ratio is rising. The CD ratio tells us how much of every rupee collected as a deposit is being lent out. PNB’s ratio rose to 73.92%, while UCO Bank reached 82.15%. Union Bank’s domestic CD ratio climbed even higher to 83.38%. A very high CD ratio can sometimes be a concern for liquidity (having enough cash on hand) if deposit growth does not pick up.

Looking at the RAM segment specifically, Canara Bank led the way with 21.3% growth in these domestic loans. Bank of India and Bank of Baroda followed closely with 19.7% and 18.5% growth respectively. Indian Bank also saw its RAM portfolio expand by 14.8%. This shows that the government's push for small business and individual lending is working well at the branch level.

For customers, this means banks may soon offer better interest rates on deposits to attract more funds. For bankers, the focus in the coming months will likely shift from just selling loans to aggressively gathering new deposits. Senior management will be watching the CASA numbers closely to ensure the cost of funds does not get too expensive.

In the next few quarters, the industry will watch if PSU banks can bridge this gap. If deposits continue to trail behind, banks might have to slow down their lending to keep their balance sheets healthy. Success will depend on how well branch teams can convince customers to keep their savings in bank accounts rather than other investment options.