HDFC Bank, ICICI Bank, SBI — Top Stock Picks By Motilal Oswal; Banks Q1 Results Preview

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Motilal Oswal Report

Systemic credit growth slowed to ~9.6% as of June 13, 2025 amid demand moderation in the retail segment and a cautious growth strategy followed by banks in unsecured loans. With moderation in loan growth, the incremental credit-deposit ratio has eased to 74%, though the outstanding CD ratio remains elevated at ~79%.

We expect credit growth to sustain at 11.5% YoY in FY26, led by a recovery in H2 FY26.

System deposit growth was stable at 10.4% in June 2025, although banks continue to face challenges in mobilizing low-cost CASA deposits. With a sharp decline in policy rates, banks are reducing both Savings Account and term deposit rates. SA rates have declined by 25-100bp since Apr’25 and TD rates have fallen by 20-100bp in the past two months.

We expect muted deposit growth in Q1 FY26, as the seasonal flow of Q4 unwinds. Deposit costs should begin to ease gradually as liability repricing happens.

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