Indian banks face margin squeeze amid funding competition
Indian banks are experiencing a 154 bps contraction in net interest margins due to the RBI's monetary easing, a significant increase in deposit costs above 5% in 2025. This trend poses challenges for profitability in the banking sector.
after close1 source ↓written by the desknot a recommendation
- in net interest
- 154 bps contraction
- reduction seen prior
- 40 bps
- in 2025
- 5%
- in 2024
- 4.7%
The Reserve Bank of India's monetary easing has led to a 154 bps contraction in net interest margins (NIMs) for Indian banks, significantly deeper than the 40 bps reduction seen prior to the COVID-19 pandemic. This shift reflects intensified competition for deposits, pushing average deposit costs above 5% in 2025, compared to 4.7% in 2024. 📉
Traders should note the implications for bank profitability as funding costs rise, potentially impacting stock performance in the sector.
Not investment advice. For informational purposes only.