Union Bank's loans are outrunning its deposits, and borrowed money is helping fill the gap

The bank reported net profit of ₹5,537 crore for the September 2026 quarter, against ₹4,249 crore a year earlier. Behind that profit is a lending book growing much faster than the money customers leave with the bank: management said loans rose 18.53% from a year earlier while deposits rose 6.8%. A bank that lends faster than it collects deposits has to fund the difference some other way, and the filed balance sheet shows borrowings doing part of that work.

In the six months to the end of September, borrowings grew by nearly twice as much as deposits. Put together, borrowed money supplied 65.8% of the increase in the two funding lines, calculated from the filed balance sheets. Management listed refinance from other lenders, infrastructure bonds and an employee share sale among its sources, and said it was not looking at a share placement with institutions. It also gathered more foreign-currency (FCNR) deposits from non-resident Indians than the range it had set at its previous call.

Management's explanation is seasonal. It described the middle of the year as a slow stretch for deposits and said government budget money tends to flow in the last months of the fiscal year. It also noted that deposit growth used to be negative or below 3%, well under the latest pace. Borrowings remain a small part of the funding base: 7.2% of deposits and borrowings combined at the end of September, calculated from the same figures. Borrowings have risen at each year-end since March 2024.

The bank's stated aims have moved over the past year. A year ago management hoped for similar growth in loans and deposits, and for a lower credit-deposit ratio, loans as a share of deposits, than the bank now runs. It has since reset them. In April it said it was on course for loan growth of 13-14% for the year. In July it aimed to grow loans one point faster than the industry, with deposit growth expected to run about two points lower, and called a ratio of about 85% to 86% a comfortable range.

On this call management said loans would grow in line with the banking system, which it put at 19.4% for credit and 17.8% for deposits. Against that latest aim, the bank's loan growth is slightly behind the system, while its deposit growth is far behind. An analyst put the bank's global credit-deposit ratio at 88.13%. Management replied that on a domestic basis the ratio was about 84%, and that a ratio of up to about 85% sat within its comfort zone.

None of this has hurt earnings so far. Other income, which includes fees and treasury gains, fell from a year earlier, so the profit increase did not come from that line. Whether the borrowing was a bridge depends on the season management itself pointed to. If deposits pick up in the closing months of the fiscal year, as management's account of the season suggests, borrowings should take a smaller share of new funding; if they keep supplying most of it, the bank will be leaning on the higher loan-to-deposit range it has accepted since July.