Indian banks facing margin pressure as loan growth slows amid high interest rates: S&P Global
S&P Global Market Intelligence in its latest report has said that Indian banks are facing margin pressure as loan growth slows amid high interest rates. It highlighted that the aggregate loan growth of six of India's largest banks--both private and state-owned--is expected to decline to 12.3 per cent in the fiscal year ending March 31, 2025. This is a sharp slowdown from the 22.5 per cent growth recorded in the previous fiscal year.
It said ‘Indian banks face margin pressures as loan growth slows amid high interest rates... Net interest margins at most lenders are expected to edge lower, the estimates show. Weaker NIMs are expected as deposit rates catch up and monetary easing looms.’ However, despite the slowdown in loan growth, it stated that the Indian banks continue to report higher net profits, although at a slower pace.
Moreover, it suggested that net interest margins (NIMs) of most banks are likely to decline in the coming months as deposit rates catch up and monetary easing comes into play. Many banks have adjusted their lending strategies, reducing consumer loans while focusing more on mobilising retail deposits to strengthen their balance sheets. The Reserve Bank of India (RBI) has maintained its benchmark interest rates at a high level, even as central banks in the US and Europe began easing their monetary policies in 2024.
