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PSBs gain NIMs while large private banks face FCNR(B) funding squeeze

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PSBs gain NIMs while large private banks face FCNR(B) funding squeeze

The divergence was sharper among the three largest private banks, whose aggregate NIM declined 1 basis point sequentially and 12 basis points year on year to 3.33%. Their cost of funds rose 15 basis points sequentially, compared with an 8-basis-point increase for the other five private banks.

PSBs’ NIM rose 10 basis points sequentially to 2.58%, while private banks’ margin remained flat at 3.29%.

The three largest private banks’ NIM fell 12 basis points year on year to 3.33%, as their cost of funds rose 15 basis points sequentially.

Private banks’ interest expenses grew 13% year on year, against 7.1% for PSBs, amid strong term deposit growth and lagging CASA growth.

The repo rate hike is expected to support margins from Q3FY27, with sector-wide NIMs projected to remain broadly stable, with an upward bias, in H2FY27.

Public sector banks (PSBs) improved their net interest margins (NIMs) in the September quarter, while private banks faced pressure from higher funding costs linked to foreign currency non-resident bank (FCNR(B)) deposits. 33%. Their cost of funds rose 15 basis points sequentially, compared with an 8-basis-point increase for the other five private banks, according to a CareEdge Ratings report on Q2FY27 banking performance.



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