The third quarter of FY2025 has been challenging for the banking sector due to the higher credit costs, slower loan and deposit growth, and pressure on NIMs. Most private banks (barring HDFCB and ICICIB) saw a steady rise in credit cost, as asset quality in the unsecured segment (credit cards and MFI) worsened further in Q3FY2025. Public Sector Banks (PSBs) reported healthy earnings growth, led by lower credit costs and offsetting weak operating performance, the report mentions. The report adds that the asset-quality deterioration remains concentrated in mid- and small-sized banks, with the market largely pricing in these concerns. It added that shallow rate cut expectations should help support net interest margins (NIMs) in the second half of Financial Year (FY) 2026, according to the report by Mirae Asset Sharekhan, which is based on data from the Reserve Bank of India (RBI) The report added that the expectations are supported by better liquidity and rate cuts by the RBI.
