Can Yes Bank’s retail deposit surge push other mid-sized private banks to recalibrate liability strategies?

Yes Bank Limited (NSE: YESBANK, BSE: 532648) has delivered a strong retail deposit performance in Q1 FY26, with branch-led and granular deposits rising 20% year-on-year to ₹1.68 lakh crore. Its retail current and savings account (CASA) ratio improved to 38.2%, while the overall CASA ratio increased to 32.8% compared to 30.8% a year earlier. The sharp growth in low-cost deposits helped lower the cost of deposits to 5.9%, down 20 basis points year-on-year, supporting a stable net interest margin of 2.5%.

How does Yes Bank’s 20% retail deposit growth create competitive pressure on peers like RBL Bank and IDFC First Bank to lower funding costs?

Market observers believe that this retail deposit momentum, which outpaced the private banking industry’s average growth, is increasing competitive pressure on other mid-sized lenders such as RBL Bank Limited and IDFC First Bank Limited. Both have reported steady loan book growth but continue to rely significantly on higher-cost term deposits, keeping their CASA ratios relatively lower and funding costs elevated compared to Yes Bank.

The strong liability performance also signals a shift in depositor confidence toward banks with balanced branch and digital strategies. Analysts noted that savers are increasingly valuing service stability, brand trust, and accessible branch networks, which has given Yes Bank an edge despite intense competition in acquiring retail customers.

Yes Bank’s retail growth is driven largely by its branch-led sourcing model, which remains a key differentiator. The bank opened approximately 2.51 lakh new CASA accounts in Q1 FY26, with average daily savings account balances climbing 35.3% year-on-year. Its branch-led retail and small-business deposits now account for 65.5% of total deposits, a sharp improvement from 57.6% in Q1 FY25.

In contrast, peers such as RBL Bank Limited and IDFC First Bank Limited have adopted more aggressive digital-led customer acquisition strategies, prioritizing fintech partnerships and mobile banking channels over branch expansion. While this has helped reduce acquisition costs, it has not resulted in similar liability traction. RBL Bank’s CASA ratio stood at 34.4% in its last reported quarter, while IDFC First Bank’s ratio hovered at around 36%, both trailing Yes Bank’s recent improvement.

According to banking sector specialists, the divergence in strategies highlights an emerging challenge for mid-tier lenders. Those focusing predominantly on digital acquisition may need to reconsider the long-term cost implications, as digitally acquired customers tend to exhibit lower stickiness and shorter deposit tenures compared to branch-sourced retail accounts. Yes Bank’s Q1 performance underscores the importance of relationship-driven banking, particularly for improving liability granularity in a competitive funding market.

Institutional investors tracking mid-sized banks say Yes Bank’s improving liability mix could put further pressure on peers to recalibrate their pricing or rethink branch-led expansion strategies. Lower-cost funding is becoming critical as credit demand remains healthy, and competition for quality borrowers intensifies. Analysts believe that banks with weaker CASA momentum may be forced to increase term deposit rates to defend market share, which could compress margins over time.

The liability shift also reflects a broader industry trend where depositors prefer banks perceived as financially stable and digitally capable but with physical accessibility. Experts suggest that a hybrid model—digital onboarding supported by branch relationship management—will likely dominate liability strategies for mid-sized private banks in FY26 and beyond.

Looking ahead, Yes Bank’s strong retail deposit momentum is expected to continue, supported by its improving credit ratings and the proposed equity infusion by Sumitomo Mitsui Banking Corporation (SMBC). The deal, once completed, is anticipated to enhance depositor confidence further, potentially widening the competitive gap with peers. For RBL Bank and IDFC First Bank, the near-term challenge will be balancing growth aspirations with the need to maintain competitive funding costs. Banking sector watchers suggest that if Yes Bank sustains its double-digit retail CASA growth through FY26, other mid-tier lenders may have no choice but to revisit branch expansion, customer acquisition models, and deposit pricing strategies to stay competitive.