Retail deposits surge while loan growth shows cautious recovery, says Q2 FY26 business update

Sometimes, the biggest stories in banking are not told through headlines but through quiet numbers. A small rise in deposits or a steady loan growth can show how a bank is rebuilding trust and strength. The Bandhan Bank Q2 FY26 loan growth report, released on 6 October 2025, tells one such story of gradual recovery and renewed confidence.

The private lender recorded a 7.2 per cent year-on-year rise in loans and advances, touching ₹1,40,062 crore. At the same time, total deposits reached ₹1,57,975 crore, up 10.9 per cent year-on-year, as stated in its Q2 FY26 business and financial performance report.

These figures show how the bank, once dependent on microfinance lending, is moving towards a more stable retail and term deposit base.

A Slow But Steady Move Upward

The latest report shows that Bandhan Bank’s loan book growth continues to recover after a muted first quarter. The 7.2 per cent growth in loans and advances for the July–September 2025 quarter compares with ₹1,30,649 crore a year ago. On a quarterly basis, it is up 4.8 per cent from ₹1,33,625 crore in June 2025.

Metric	September 2025	September 2024	Change (YoY)
Loans and Advances	₹1,40,062 crore	₹1,30,649 crore	+7.2%
Sequential Growth (June–Sep 2025)	₹1,33,625 crore	–	+4.8%
Collection Efficiency (Excluding NPAs)	98.00%	97.90%	+0.1%

The rise in collection efficiency to 98 per cent underlines a gradual improvement in repayment discipline. It also indicates that the microfinance portfolio, which faced stress in early FY26, is stabilising.

However, the growth is still lower than large private peers such as HDFC Bank and Kotak Mahindra Bank, which saw double-digit expansion during the same period. Bandhan Bank’s management seems to have shifted focus to strengthening the foundation rather than pushing aggressive lending.

Bandhan Bank Shows Steady Recovery in Lending and Deposits

Lending refers to the total amount of money banks give out as loans to customers. Deposits are the money customers keep with the bank. The gap between these two numbers reflects how efficiently the bank converts its deposits into loans.

The Bandhan Bank FY26 lending and deposits pattern shows a steady recovery. The latest report highlights how the bank has begun to rely more on retail term deposits. This approach creates a stronger funding base and lowers the risks that come with short-term bulk deposits.

Deposit Type	Amount (₹ crore)	YoY Change	Observation
Total Deposits	1,57,975	0.109	Consistent overall rise
CASA Deposits	44,214	–6.5%	Slight decline
Retail Term Deposits	68,539	+39.00%	Strong growth
Bulk Deposits Share	39.80%	Down from 48.2%	Shift towards retail base

The increase in retail term deposits by 39 per cent year-on-year shows stronger participation by individual savers. The drop in CASA deposits suggests customers prefer longer-tenure savings products, likely influenced by higher interest rates.

A smaller share of bulk deposits, down to 39.8 per cent, shows the bank’s move to reduce dependence on large corporate clients. These small changes together improve stability and help build predictable cash flows for future lending.

Comparing Present Performance with Past Challenges

The latest quarter’s performance gains meaning only when viewed alongside earlier quarters. In Q1 FY26, Bandhan Bank’s net profit had dropped nearly 65 per cent year-on-year, mainly due to higher provisions in its microfinance portfolio. (Times of India, July 2025)

The bank’s Q2 FY26 business update, however, paints a different picture. The report shows a return to deposit-led growth and early signs of credit revival.

Quarter	Loan Growth (YoY)	Deposit Growth (YoY)	Profit Movement (YoY)
Q1 FY26	+6.4%	+9.8%	–65%
Q2 FY26	+7.2%	+10.9%	Yet to be declared
Q2 FY25	+11.4%	+13.6%	Positive trend

Comparing these numbers shows a transition from stress to stability. Deposit inflows have grown consistently, even when loan growth stayed modest. This recovery is gradual, but it signals improved customer trust and better balance sheet strength.

The Bandhan Bank quarterly financial performance summary indicates that the lender is moving towards a more sustainable growth model. The improvement in its liquidity coverage ratio, at 152.68 per cent, further supports this shift.

Linking Current Developments with Past News

This story links clearly with earlier reports on Bandhan Bank’s microfinance troubles. In July 2025, Bandhan Bank had one of its weakest quarters. The renewed focus in Q2 FY26 on building deposits and maintaining portfolio discipline shows that the bank is shifting its short-term strategy to fix its foundation.

Readers can see how the bank earlier reached this stage in the LoansJagat article “Bandhan Bank’s Micro Challenges: Unsecured Loan Book & Stress”, which covers the pressures in its microfinance business..

Government and Sector Response in Perspective

In June 2025, the Reserve Bank of India (RBI) reduced the repo rate by 50 basis points, a move aimed at easing credit conditions. This step indirectly supported banks like Bandhan by improving liquidity. The RBI’s continued focus on maintaining ample liquidity helped smaller private banks attract deposits despite tight competition.

Meanwhile, the government’s push for stronger rural credit delivery also supported the bank’s microfinance recovery. Schemes that encouraged financial inclusion and small business loans aligned well with Bandhan’s core lending base.

The RBI’s Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks, released in September 2025, showed a sector-wide moderation in credit growth to around 7–8 per cent, while deposits grew around 10 per cent. Bandhan’s results fall in the same range, proving it is moving in line with industry momentum.

Indicator	Indian Banking Sector Average (Sep 2025)	Bandhan Bank (Sep 2025)
Credit Growth (YoY)	7.80%	7.20%
Deposit Growth (YoY)	10.10%	10.90%
Credit-Deposit Ratio	87.50%	88.70%

Bandhan’s slightly higher credit-deposit ratio shows it is deploying funds efficiently, while still keeping liquidity above the regulatory comfort zone.

Conclusion

The coming quarters will test how the bank manages to expand its loan book while keeping asset quality intact. Analysts expect a gradual pick-up in lending during Q3 and Q4 FY26, particularly in retail and small business loans.

The focus on retail term deposits, lower reliance on bulk funding, and higher liquidity coverage show that the bank is laying groundwork for a stable future. If the trend continues, the Bandhan Bank FY26 lending and deposits growth could move closer to double digits by the end of the financial year.

The broader takeaway from this Bandhan Bank quarterly financial performance is that small corrections often make bigger recoveries possible. For a lender that has faced sharp swings in profit and perception, this steady quarter may prove to be its most important one yet.

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