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Banks Eye Healthy Q2 Profit Growth Despite Margin Pressures
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CNBC TV18•14-10-2026, 12:55
Banks Eye Healthy Q2 Profit Growth Despite Margin Pressures
- •System-wide credit growth stands at around 19% year-on-year, while deposits have increased nearly 17% supported by FCNR-B inflows.
- •Net interest margins are expected to remain under pressure in Q2 due to higher liquidity from FCNR-B deposit inflows.
- •Large private sector banks are projected to lead growth with core pre-provision operating profit rising 16% year-on-year.
- •Asset quality is expected to remain stable across the sector with credit costs likely staying steady or moderating.
- •Nomura expects RBI rate hikes and loan repricing to support bank margins starting from the December quarter.
Key Questions Answered
System-wide credit growth is standing at around 19% year-on-year, while deposits have increased by nearly 17%, supported largely by foreign currency non-resident inflows.
Net interest margins are likely to remain under pressure due to higher liquidity following foreign currency non-resident deposit inflows. Until these surplus funds are fully deployed, they can weigh on NIMs across the banking sector.
From the December quarter, a 25-basis-point rate hike could start supporting margins as floating-rate loans reprice faster than deposits. Additionally, the rate cycle shift will help loans reprice ahead of term deposits to drive expansion.
