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Gold, commercial lending give smaller private banks a margin edge

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Gold, commercial lending give smaller private banks a margin edge

The NII growth has varied sharply across private banks, with mid-small private banks reporting NII growth of 15-30% YoY, while Axis Bank, HDFC Bank and Kotak Mahindra Bank each recorded growth of 7-9% YoY and around 1% sequentially.

Mid-small private banks reported 15-30% YoY NII growth, well ahead of the 7-9% growth recorded by large private banks. Retail gold loans grew around 95% YoY, while banks with higher gold and commercial lending exposure saw stronger yield expansion. Large private banks faced double-digit sequential NIM declines, while mid-small private banks reported stable-to-positive NIM movement. Higher bulk deposit rates, weaker CASA and fading term-deposit repricing kept funding costs under pressure.

Mid-small private banks are seeing stronger margin performance than large private lenders, with banks benefiting from higher contributions from gold and commercial lending reporting better-than-expected expansion in yields. The divergence comes as wholesale-heavy banks face softer yields on advances and large private banks report pressure on net interest margins (NIMs). NII growth for the overall banking sector accelerated to a multi-quarter high of around 11% year-on-year in Q1FY27. However, the performance varied sharply across private banks, with mid-small private banks reporting NII growth of 15-30% YoY, while Axis Bank, HDFC Bank and Kotak Mahindra Bank each recorded growth of 7-9% YoY and around 1% sequentially, according to an ICICI Securities report. Advt

Retail gold loans remained one of the fastest-growing segments, expanding around 95% YoY, while ex-gold retail credit growth remained stable at around 12%. SME credit growth was also supported by ECLGS and hardened inflation.


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