Bank Deposit Growth Hits 7-Quarter Low

In a concerning trend for the Indian banking sector, bank deposits have slumped to a seven-quarter low, growing at just 9.9% in the July-September 2025 period. This is a significant decline from the 11.7% growth recorded in the same quarter the previous year, as per data released by the Reserve Bank of India (RBI).

Metropolitan branches, which hold a larger share of deposits, reflected a similar slowdown, with growth dropping to 9.6% in September 2025 from 12.7% a year prior. On the other hand, rural and semi-urban branches showed resilient growth rates of 11.7% and 10.7%, respectively, indicating a possible shift in deposit behavior among different demographics.

Public sector banks (PSBs) reported an increase in their share of total deposits, rising to 57.6% from 57.3% in the previous quarter. Conversely, private sector banks saw a notable decline in deposit growth, falling to 10% in September from 15.1% a year ago. This trend raises questions about the competitive landscape between public and private banks in India.

Moreover, the report highlights a declining trend in term deposit growth, which stood at 11.6% during the quarter. However, there was a noticeable increase in current and savings deposits, growing by 9.3% and 6.7%, respectively. This shift could suggest that depositors are increasingly favoring more liquid forms of savings.

By the end of September, a considerable 69.8% of term deposits were held in the one to three-year maturity bucket, up from 66.8% a year ago. Additionally, 20% of term deposits were in the maturity period of up to one year. The data also revealed a worrying rise in the share of term deposits bearing interest rates of less than 7%, which surged to 46% from 31.2% a year prior. This trend indicates a shift in investor preferences and could have long-term implications for the banking sector.

Overall, the slowing deposit growth and changing dynamics in interest rates present a complex scenario for the Indian banking landscape, necessitating strategic adjustments from banks to retain and attract depositors.