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Bank Margins Set to Rebound from Q3 as Lending Rates Climb: Report
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News18•01-10-2026, 13:00
Bank Margins Set to Rebound from Q3 as Lending Rates Climb: Report
- •Bank margins are projected to improve from Q3 FY27 due to increased fresh lending rates across most loan segments, according to an IIFL Capital report.
- •Near-term margins may face pressure from FCNR deposits, but fresh lending rates have already risen by 2-24bps quarter-to-date.
- •The median one-year Marginal Cost of Funds based Lending Rate (MCLR) increased by 7 basis points quarter-on-quarter in Q2.
- •Fresh spreads expanded by 16 basis points for private banks and 2 basis points for public sector banks during the quarter.
- •Strong credit growth continues, with domestic system loans up 20.1% year-on-year in August, driven by gold, NBFC, MSME, and vehicle loans.
Key Questions Answered
Bank margins are expected to improve from the third quarter of FY27 as fresh lending rates have increased across most loan segments.
The report expects FCNR deposits to drag net interest margins in the second quarter with an estimated impact of 3 to 40 basis points.
Fresh lending rates increased by 2 to 24 basis points quarter-to-date in most categories, including large industry, MSME, infrastructure, trade, education, and other personal loans.
