Banks set for strong Q3 on back of GST cuts and consumption recovery
Mumbai: On the back of falling interest rates, GST rationalization, and festive cheer, banks are likely to post double-digit year-on-year growth in loans and deposits for the October–December quarter (Q3FY26), according to provisional numbers released by more than a dozen banks over the past few days. State-owned Bank of Baroda on Sunday reported its business update for the third quarter of 2025–2026, with several core metrics exceeding management guidance. The lender’s domestic loan book grew 13.54 per cent to ₹10.95 lakh crore, while deposits surged 11.13 per cent to ₹13 lakh crore. Domestic retail advances, excluding pool purchases, rose 17.3 per cent to ₹2.85 lakh crore. Bank of Baroda’s management had earlier guided for 11–13 per cent credit growth in FY26, driven largely by the retail and MSME segments.
State-owned Punjab National Bank reported a 10.15 per cent year-on-year (Y-o-Y) rise in domestic gross advances to ₹11.68 lakh crore in Q3FY26, up from ₹10.60 lakh crore a year earlier, while deposits rose 9 per cent Y-o-Y to ₹16.60 lakh crore.
“Growth momentum has strengthened over the past few months, remaining above 10 per cent since July 2025. The credit cycle has seen a meaningful pickup after GST cuts, with system growth tracking above 11 per cent in October and November 2025, driven by a consumption-led recovery. With the full 100 basis points cut in the Cash Reserve Ratio now in place and recent supportive regulatory measures, further support to credit expansion is expected ahead. We, therefore, estimate system credit growth to remain above 12 per cent Y-o-Y in FY26 and improve to around 13 per cent in FY27. We expect large private banks to grow at 3–4 per cent QoQ, with mid-sized banks expanding faster,” said Nitin Aggarwal, research analyst at Motilal Oswal, in a report.
According to RBI data, as of December 12, 2025, system credit growth improved to 11.7 per cent Y-o-Y (7.7 per cent year-to-date), recovering from the May 2025 low of 8.9 per cent.
Bank of India posted a 15.07 per cent Y-o-Y increase in advances to ₹6.29 lakh crore from ₹5.46 lakh crore, while UCO Bank’s advances grew 17.5 per cent Y-o-Y to ₹2.15 lakh crore. Union Bank of India’s Q3 advances were up 7 per cent Y-o-Y to ₹10.16 lakh crore, with deposits rising 3 per cent Y-o-Y to ₹12.22 lakh crore.
Among private banks, South Indian Bank’s overall advances and deposits rose 11 per cent and 12 per cent, respectively, to ₹96,765 crore and ₹1.18 lakh crore as of December-end. CSB Bank’s overall loans rose 29 per cent Y-o-Y to ₹37,208 crore, while deposits increased 21 per cent to ₹40,460 crore. The lender’s loans against gold and gold jewellery surged 46 per cent Y-o-Y to ₹19,023 crore, while low-cost CASA deposits rose 3 per cent Y-o-Y to ₹8,316 crore.
