Stories
Indian Bank Loan Growth Strengthens and Margins Near Recovery Says IIFL Capital
- •A report by IIFL Capital indicates that Indian banks could see stronger lending growth and recovering margins over the coming quarters.
- •Retail lending momentum is improving with healthy disbursements while corporate credit demand remains robust across lenders.
- •Major institutions like HDFC Bank, ICICI Bank, and Axis Bank reported strong year-on-year advances in the September quarter.
- •Asset quality showed signs of improvement as several lenders experienced lower fresh bad-loan formation and declining credit costs.
- •Deposit mobilization and competition remain key challenges that could influence the pace of funding-cost improvements for banks.
Key Questions Answered
According to an IIFL Capital report reviewing FY27 July-September quarter results, Indian banks are experiencing improved retail lending momentum and healthy corporate credit demand. HDFC Bank's management indicated that its margins bottomed out in the September quarter and are poised for gradual recovery, supported by lower funding costs and recent rate increases, while retail loan growth improved to 8 per cent year-on-year.
Loan growth remained strong across major lenders in the September quarter. HDFC Bank's advances rose by 16 per cent year-on-year, Axis Bank reported 23 per cent growth, and ICICI Bank recorded a robust 30 per cent expansion, supported by corporate, small business, and retail lending segments.
IIFL Capital flagged that increasing competition for deposits and a structural slowdown in current account and savings account (CASA) deposit growth at some lenders could limit the pace of funding-cost improvements. Sustaining credit growth will depend on effective deposit mobilization, deployment of available liquidity, and continued asset quality stability.
