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Moneycontrol•09-10-2026, 11:37
Q2 Preview: Bank Net Interest Margins and FCNR-B Deployment in Focus
  • •Indian banks are set to report healthy September quarter growth, but investor focus will remain heavily on net interest margins amid persistent pressure.
  • •Foreign Currency Non-Resident deposit inflows have flushed the banking system, which is expected to cause near-term NIM contraction due to liquidity deployment and repayment of borrowings.
  • •Private lenders like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank are projected to see the sharpest NIM compression of 8 to 20 basis points YoY.
  • •Public sector banks are expected to maintain stable, range-bound NIMs due to a lower proportion of FCNR-B deposits and a focus on retiring high-cost liabilities.
  • •Banks are sustaining healthy credit growth driven by personal loans and corporate lending, though gold loan expansion has started to moderate.
Read Full Article on Moneycontrol in English

Key Questions Answered

FCNR-B deposit inflows are expected to cause net interest margin compression for Indian banks in Q2 due to liquidity deployment, repayment of borrowings and bulk deposits, and growth in international loan books, with private lenders facing the sharpest impact of 8 to 20 basis points.

Foreign Currency Non-Resident deposit inflows under the Reserve Bank of India's special concession window reached $132.98 billion by August 31, when the programme concluded, with total broader inflows reaching approximately $136 billion.

Public sector banks are expected to post stable, range-bound net interest margins compared to private peers due to lower proportions of FCNR-B deposits relative to overall deposits and a focused strategy on retiring high-cost liabilities.

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