Mumbai, Oct. 14 -- Indian banks' growth in deposits kept pace with loans in the first quarter of the fiscal year but slipped in the second, returning to the trailing trend seen in the last two years, provisional numbers for Q2 , the quarter ended September, show. This may spell funding challenges for banks but could be good news for depositors.

When deposits grow slower than loans over a prolonged period, it could lead to liquidity and asset-liability mismatch challenges for lenders. Given that banks rely on deposits for cheap funds, this widening gap would push them towards other sources. Customers might benefit, though. When deposits are scarce, banks tend to raise deposit rates to attract funds.

For the broader banking system, credit...