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PSBs gain on margins front as private banks face funding-cost pressure

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PSBs gain on margins front as private banks face funding-cost pressure

The NIM of select PSBs rose 10 basis points sequentially and 15 bps year on year to 2.58% in the September quarter of FY27, while that of private sector banks (PVBs) remained flat sequentially at 3.29% and declined 8 bps year on year

Large PVBs' NIM fell 1 bp sequentially and 12 bps year on year to 3.33%, while other PVBs' NIM rose 9 bps sequentially to 3.06%.

PSBs' lending yields rose 18 bps sequentially against a 9-bp increase in funding costs, compared with a 6-bp rise in lending yields and 14-bp increase in funding costs for PVBs.

NII of select PSBs grew 18.4% year on year in Q2 FY27, against 14.4% growth for PVBs, while interest income from advances rose 15.3% versus 14.1%.

A 25-bp repo rate increase could support margins in Q3 as repo-linked loans reprice faster than deposits, though large PVBs face continued funding-cost pressure from FCNR(B) deposits.

Public sector banks (PSBs) are seeing stronger momentum in net interest margins (NIMs) than private sector banks , as lending yields rose faster than funding costs in the September quarter, while larger private lenders faced greater pressure from rising funding costs. 29% and declined 8 bps year on year, according to CareEdge Ratings. 33%. 06%.



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