Indian banks demonstrated remarkable resilience in the third quarter of fiscal year 2026, with multiple lenders reporting double-digit growth in their loan portfolios and deposits, signaling healthy credit demand and strong operational momentum across the banking sector.
Six major banks that released their quarterly business updates for the October-December period recorded impressive year-on-year growth. Among public sector banks, Punjab National Bank led with domestic gross advances reaching ₹11.68 trillion, representing a 10.15% increase from the previous year. Bank of India posted even stronger numbers with a 15.07% surge in advances to ₹6.29 trillion, while UCO Bank achieved the highest growth rate among state-owned lenders at 17.5%, with advances climbing to ₹2.15 trillion.
The private banking sector also displayed robust performance during the quarter. South Indian Bank reported an 11.3% year-on-year increase in advances to ₹96,765 crore, though the bank noted that a write-off of ₹900 crore during the quarter impacted growth figures. Without this adjustment, the growth rate would have reached 12.43%, according to the bank's exchange filing.
Tamilnad Mercantile Bank recorded a 16.3% rise in advances to ₹50,763 crore, while CSB Bank emerged as the standout performer with an exceptional 29% year-on-year increase in advances to ₹37,208 crore. The bank's growth was significantly driven by its gold loan portfolio, which comprises nearly half of its total loan book at ₹19,023 crore, representing a 46% annual increase.
Deposit mobilization also remained strong across the banking sector. UCO Bank's deposits grew 10.91% to ₹2.92 trillion, while Punjab National Bank's domestic deposits increased 8.32% to ₹15.97 trillion. Bank of India reported a 12.8% rise in deposits to ₹7.65 trillion.
Among private sector lenders, South Indian Bank's deposits expanded 12.17% to ₹1.18 trillion, and Tamilnad Mercantile Bank recorded a 12.53% increase to ₹56,707 crore. CSB Bank matched its advance growth momentum with a 21% surge in deposits to ₹40,460 crore as of December 31, 2025.
The strong quarterly performance reflects sustained credit demand in the Indian economy and effective deposit mobilization strategies by banks. The Retail, Agriculture, and MSME segment, a priority for public sector banks, showed particularly robust growth of approximately 17%, indicating healthy lending activity in these crucial sectors.
Industry analysts view these results positively, suggesting that the banking sector is well-positioned to maintain growth momentum through the remainder of the fiscal year despite challenges in low-cost deposit mobilization reflected in moderating CASA ratios.