Bank lending accelerated in the April-June quarter of FY27, but deposit mobilisation continued to trail credit growth, widening the funding gap across the banking system and highlighting mounting pressure on banks' liability franchises, according to business updates reported by The Times of India.While several lenders posted strong double-digit growth in advances during the quarter ended June 2026, deposit growth remained subdued, with some banks even reporting sequential declines in deposits. Analysts warned that the widening gap between loans and deposits has pushed the banking system's loan-to-deposit ratio to one of its highest levels in more than a decade, raising concerns over funding sustainability.Central Bank recorded the highest year-on-year growth in global advances at around 28.8%, followed by Tamilnad Mercantile Bank (27%), Dhanlaxmi Bank (26.5%) and J&K Bank (25.5%). Among larger lenders, Bank of India reported advances growth of 18.6%, while Canara Bank posted nearly 18%, driven by continued demand from corporate borrowers as well as the retail, agriculture and MSME (RAM) segments.The contrast was sharper on the deposit side. RBL Bank reported a 10.2% quarter-on-quarter decline in total deposits after allowing high-cost wholesale deposits to mature following Emirates NBD's preferential investment in the bank. IDBI Bank's deposits fell 6.3% sequentially, while Bank of Baroda reported a 0.9% decline in global deposits compared with the March quarter. Bank of Baroda also reported a marginal 0.9% decline in global advances over the same period.The report said public sector banks and private lenders continued to follow different balance sheet strategies. Public sector banks such as Canara Bank and Bank of India maintained relatively balanced growth in both credit and deposits, while several private lenders actively reduced expensive bulk deposits to protect margins amid intense competition for deposits.Bankers cited multiple factors behind the unexpectedly strong credit demand during what is traditionally a slower first quarter. These included the rollout of an emergency credit line guarantee scheme, longer working capital cycles caused by supply chain disruptions linked to the blockade of the Strait of Hormuz during the West Asia conflict, and increased borrowing by oil companies after the government chose not to fully pass on higher global crude oil prices.Quoting Macquarie analyst Suresh Ganapathy, ToI reported that public sector banks are continuing to lose market share in deposits. He said deposit growth for PSU banks stood at 10.7% year-on-year, below the banking system's overall deposit growth of around 12%, contributing to weaker stock performance following quarterly business updates.Ganapathy also noted that broader banking data up to June 15 showed deposits growing 12.2% year-on-year, still trailing loan growth. As a result, the credit-deposit growth gap widened to 5.4% by May 2026, pushing the banking system's loan-to-deposit ratio to 82.7%—among the highest levels recorded in more than ten years.(With inputs from ToI)