Mid-sized private sector banks have reported their March 2026 quarterly updates over the past few days and they have also shown strong loan growth. These ‘smaller’ private sector banks are often hidden from the financial media and despite robust growth, they trade at valuations significantly lower than that of much larger peers like HDFC Bank and Kotak Mahindra Bank.
For instance, Tamil Nadu-based Karur Vysya Bank grew its loan book by nearly 16.9% y-o-y in the March 2026 quarter, and trades at 2 times price-to-book value, according to Screener.in.
Larger rival, Kotak Mahindra Bank grew its advances by 16.2% y-o-y in Q4FY26 and trades at 2.9 times price-to-(standalone) book value. Kotak Mahindra Bank’s core banking operations are reflected in its standalone quarterly results.
Regional prowess: How SMEs and gold loans drive the momentum
Mid-sized banks typically concentrate their operations in a few states or a particular region, and derive a majority of their loan growth from SMEs, retail and gold loans. A similar trend is expected in the March 2026 quarter.
Loan growth in March 2026 quarter
| Bank | Loan growth (% y-o-y) in March 2026 quarter |
| IDFC First Bank | 20.0% |
| Karur Vysya Bank | 16.9% |
| South Indian Bank | 15.7% |
| HDFC Bank | 10.2% |
| Kotak Mahindra Bank | 16.2% |
For instance, IDFC First Bank reported a 20% y-o-y loan growth to Rs 2.9 lakh crore in the March 2026 quarter. The Mumbai-based bank has not provided details of the sectors it has lent / provided loans to.
Its deposits also grew 17.2% y-o-y to Rs 2.84 lakh crore in Q4FY26. IDFC First Bank had a credit-to-deposit ratio of nearly 102% in the March 2026 quarter.
Banks typically maintain a credit-deposit ratio of 75% to 80%.
IDFC First Bank had grown its loans by 20.6% y-o-y to Rs 2.69 lakh in the December 2025 quarter with a credit-to-deposit ratio of 92.4% in the quarter under review.
They are not alone.
Tamil Nadu-based Karur Vysya Bank grew its advances by nearly 16.9% y-o-y to Rs 98,743 crore in the March 2026 quarter with a credit-to-deposit ratio of nearly 85.4% in the quarter under review.
Also, Kerala-based South Indian Bank grew its advances by 15.7% y-o-y Rs 1.01 lakh crore in the March 2026 quarter, and its deposits grew 14.7% y-o-y to Rs 1.23 lakh crore in the quarter under review. Its credit-to-deposit ratio was 82.1% in Q4FY26.
The large-cap slowdown: HDFC and Kotak balance growth with liquidity
HDFC Bank, the largest private sector bank, on Saturday had highlighted that its advances in Q4FY26 grew 10.2% y-o-y to Rs 30.57 lakh crore. Its deposits grew by 14.4% to Rs 31.05 lakh crore at the end of the March 2026 quarter, and it would imply a credit-to-deposit ratio of nearly 98.5% in the March 2026 quarter.
HDFC Bank following its merger with HDFC in July, 2023, has been very cautious in growing its loan book, since its credit-to-deposit ratio is well above 90%.
Banks typically maintain a credit-deposit ratio of 75% to 80%.
Meanwhile, Kotak Mahindra Bank grew its advances by 16.2% y-o-y to Rs 4.95 lakh crore in the March 2026 quarter, and deposits by 14.7% y-o-y to Rs 5.72 lakh crore in the quarter under review. Kotak Mahindra Bank had a credit-to-deposit ratio of 86.5% in Q4FY26.
The valuation chasm: Identifying the 2026 pricing opportunity
Mid-sized private banks have matched or exceeded the loan growth of much larger rivals in the March 2026 quarter, on a smaller loan base. And despite the strong loan growth in a quarter, mid-sized banks trade at much lower valuations than larger rivals.
Valuations of mid-sized private banks versus large private banks
| Bank | Price- to- (standalone) book value |
| IDFC First Bank | 1.1 times |
| Karur Vysya Bank | 2.0 times |
| South Indian Bank | 0.9 times |
| HDFC Bank | 2.2 times |
| Kotak Mahindra Bank | 2.9 times |
Having said that going forward there are two key things to content with.
First, if the impact of the war in the middle east persists, then there could be an impact on the Indian economy. Typically, the smaller and medium size companies, SMEs, take the worst hit. If that were to be the case, then the loan books of these banks could come under some pressure.
Second, it is now expected that interest rates could rise during the year. If that were to be the case, then it’s good news for banks as their lending rates would tend to reset faster than the borrowing costs, thereby triggering some growth in spreads.
But these are uncertainties and one needs to track the developments closely to see how things pan out.
Investors could put mid-sized banks on their watchlist for 2026, and track whether the how these banks perform in FY27 and beyond.
Disclaimer:
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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