Selective Lending and Rate Transmission Support Margin Stability

Private sector banks in India are expected to maintain stable net interest margins (NIMs) in Q4FY26, despite the Reserve Bank of India’s recent 25 bps repo rate cut. Slower deposit repricing, strong current account savings account (CASA) ratios, and selective lending strategies are helping banks cushion margin pressures. While the full impact of the rate cut is yet to be felt, banks like HDFC Bank, ICICI Bank, and RBL Bank remain optimistic about margin resilience. Bank Margin Outlook Summary (5‑Point Insightful Breakdown) 1. NIM Trends Across Banks -

: NIM rose from 4.5% (Q2) to 4.6% (Q3). - : Held steady at 4.3% across Q2 and Q3. - : Improved from 3.3% to 3.4%, with further upside expected. - : Margins rose from 3.1% to 3.2%. - South Indian Bank: NIM increased from 2.8% to 2.9%. - : Margins edged up from 2.5% to 2.6%. - : Margins declined from 3.7% to 3.5%, reflecting deposit cost pressures. Impact of RBI’s Rate Cut - RBI’s 25 bps repo rate cut has begun to transmit into lending rates. - Banks expect gradual margin impact, with HDFC Bank noting that full transmission is pending. - Rate cut may support credit growth but could pressure deposit costs over time. CASA and Lending Strategy - High CASA ratios continue to support low-cost funding. - Banks are adopting selective lending to preserve spreads. - Focus remains on retail and secured credit segments. Deposit Repricing Dynamics - Deposit rates are repricing slower than lending rates, helping protect NIMs. - Banks are managing deposit mix to avoid margin compression. Outlook and Sector Implications - Margin stability expected to continue in Q4FY26. - Sector remains resilient amid macro shifts, with NIMs likely to hold or improve modestly. - Investors may view stable margins as a positive signal for earnings consistency.