How Is Bandhan Bank Navigating Loan Growth and CASA Pressure in Q3 FY26?
Bandhan Bank’s Q3 FY26 provisional business update presents a picture of steady loan expansion alongside a visible shift in the composition of deposits. While advances growth remains intact and liquidity stays comfortable, pressure on CASA deposits has emerged as a key variable to monitor. This update offers insight into how the bank is balancing growth, funding stability, and asset-liability management in a competitive banking environment.
For investors tracking mid-sized private banks, Bandhan Bank’s operational metrics matter not just for quarterly performance, but for understanding how its business model is evolving. The bank has historically been identified with microfinance-led growth, but over the years it has attempted to diversify into retail and secured lending. The Q3 FY26 numbers reflect this gradual transition, with mixed signals on funding costs and deposit mix.
Advances Growth Remains Steady
Loan growth continues to track in line with the bank’s calibrated expansion strategy.
Bandhan Bank reported advances of approximately ₹1.45 lakh crore in Q3 FY26, marking a year-on-year growth of around 10 percent and a quarter-on-quarter increase of 3.7 percent. This reflects a steady credit expansion rather than aggressive balance sheet growth, suggesting a cautious approach amid macro uncertainties and evolving regulatory expectations.
From a structural standpoint, this pace of growth indicates that the bank is prioritising asset quality and risk-adjusted returns over headline loan growth. In an environment where credit demand remains uneven across segments, such moderation can help protect margins and limit stress build-up in the loan book.
Deposit Growth: Mixed but Improving Quality
Deposit traction shows improving quality despite near-term volatility.
Total deposits stood at approximately ₹1.57 lakh crore, reflecting an 11 percent year-on-year increase. However, deposits declined marginally by 0.9 percent on a sequential basis. At first glance, the quarterly decline may appear concerning, but a deeper look at the deposit mix provides a more nuanced picture.
Retail deposits grew strongly, rising 17.2 percent year-on-year and 1.2 percent quarter-on-quarter. This suggests improving traction in granular funding sources, which are typically more stable and less sensitive to rate competition compared to bulk deposits.
Retail term deposits, in particular, surged 35.8 percent year-on-year and 4.1 percent sequentially. This sharp increase indicates that the bank has been successful in attracting longer-tenure retail funds, albeit likely at a higher cost. While this can exert pressure on margins in the short term, it improves balance sheet stability and reduces reliance on volatile wholesale funding.
Bulk Deposits Decline Supports Mix Improvement
Lower bulk deposits improve funding quality despite headline growth moderation.
Bulk deposits declined by about 2 percent year-on-year and 5.8 percent quarter-on-quarter. While this may dampen total deposit growth in the short term, it supports a healthier deposit mix. Bulk deposits are typically rate-sensitive and can reverse quickly during periods of liquidity tightening.
The conscious reduction in bulk deposits suggests that Bandhan Bank is willing to sacrifice some growth momentum to improve funding durability. Over the medium term, this strategy can help stabilise net interest margins once the interest rate cycle becomes more predictable.
CASA Pressure Remains a Key Monitor
CASA trends reflect competitive intensity in the banking system.
CASA deposits declined 4.5 percent year-on-year, with the CASA ratio slipping to 27.26 percent from 31.7 percent in the previous year. This compression highlights the intense competition for low-cost deposits across the banking sector, particularly from larger private banks and new-age financial platforms.
A declining CASA ratio typically implies higher funding costs, as banks rely more on term deposits to support loan growth. For Bandhan Bank, this is an area that requires close monitoring, as sustained CASA pressure could weigh on margins if not offset by repricing of assets or operational efficiencies.
That said, CASA ratios across the industry have been under pressure, and Bandhan Bank is not an outlier in this respect. The key question for investors is whether the bank can stabilise CASA levels over the next few quarters through branch expansion, digital initiatives, and cross-selling efforts.
Liquidity Position Remains Comfortable
Strong liquidity buffers provide balance sheet comfort.
Bandhan Bank reported a Liquidity Coverage Ratio of 149 percent, well above regulatory requirements. This indicates that the bank maintains adequate high-quality liquid assets to meet short-term obligations even under stressed scenarios.
A strong liquidity position is particularly important in periods of deposit volatility, as it provides management with flexibility to manage funding costs without resorting to aggressive rate hikes. It also reassures regulators and investors about the bank’s resilience.
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What This Update Signals for the Medium Term
Operational trends suggest stability with selective pressure points.
The Q3 FY26 business update suggests that Bandhan Bank is in a consolidation phase rather than a high-growth cycle. Steady advances growth, improving deposit quality, and strong liquidity buffers are positives. However, CASA compression remains a structural challenge that could influence profitability metrics in the near term.
For long-term investors, the focus should remain on how effectively the bank transitions toward a more diversified and retail-led funding model. Progress on asset quality, cost control, and margin management will determine whether the current stability can translate into sustainable value creation.
Investor Takeaway
Derivative Pro & Nifty Expert Gulshan Khera, CFP®, believes that Bandhan Bank’s Q3 FY26 update reflects a phase of balance sheet stabilisation rather than acceleration. While loan growth remains steady and liquidity is comfortable, CASA trends warrant close observation as they influence long-term margin sustainability. Investors should evaluate the bank through a risk-managed, medium-term lens, focusing on consistency and funding quality rather than short-term fluctuations. More structured market insights are available at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
Written by Indian-Share-Tips.com, which is a SEBI Registered Advisory Services
