Deposit Growth
How fast deposits grow — the fuel, and the ceiling on how much you can lend.
Why you care
A bank can only lend what it has raised. Deposits are the fuel — and the ceiling. When loan demand outruns deposits, banks fight a "deposit war," raising FD rates to pull money in. That war is fought at your counter, and it shows up straight away in cost of funds.
Run the numbers
To grow loans 15% you need deposits to roughly keep pace. If CASA can't fill the gap, you raise 1-year FD rates from 7% to 7.5% (illustrative) to pull in ₹ — and your whole cost of funds ticks up with it.
Where this goes
Deposit growth sets the denominator of the CD ratio: if it lags lending, the ratio climbs and the balance sheet gets stretched. And how you grow deposits — cheap CASA or costly FDs — flows straight into cost of funds.
Why you care
Deposit growth is how fast a bank's deposit base expands. If credit growth is the engine's output, deposit growth is its fuel supply — and no bank can lend faster than it can raise money to lend.
This is the constraint people underestimate. It's easy to find borrowers; it's hard to find cheap, stable deposits to fund them. When the whole system is lending fast and deposits aren't keeping up, banks enter a "deposit war" — competing to raise term-deposit rates to pull savers in. That sounds like a treasury problem, but it lands on you: the special FD rates, the deposit mobilisation targets, the quarter-end push. And every rupee won by raising rates is a rupee that costs more, so a deposit war quietly eats the margin it was meant to protect.
Run the numbers
Suppose a bank wants to grow its ₹100 cr loan book by 15% to ₹115 cr. It needs roughly ₹15 cr of fresh funding (illustrative).
- If CASA growth supplies most of it, funding stays cheap and the margin holds.
- If CASA can't keep up, the bank raises 1-year FD rates from 7% to 7.5% to pull in term money.
That half-point doesn't just apply to the new ₹15 cr — as the whole FD book reprices, it lifts the blended cost of funds across the balance sheet. So the bank funds its growth, but at a thinner spread. This is the tension at the heart of every fast-growing bank: growth needs funding, and funding raised in a hurry is expensive.
Where this goes
Deposit growth sets the denominator of the credit-deposit ratio: when lending outruns it, the ratio climbs and the balance sheet is stretched toward its liquidity ceiling. And the composition of that growth — cheap CASA versus costly term deposits — feeds directly into cost of funds, which is why the deposit-side hustle matters as much as the lending side.