Indian Banks' Margins Set to Narrow in FY26 as Credit Growth Slows

Unknown Apr 02, 2026 1 Views

Indian banks are expected to face margin pressures in FY2026 as credit growth slows amid high interest rates. ICRA has revised its credit growth estimate downwards to 9.7-10.3% for FY2026, citing persisting high credit-to-deposit ratios and proposed changes in liquidity coverage ratio frameworks. While profitability may trend downwards, return indicators are projected to remain stable at 1.1-1.2% ROA for FY2026. The RBI's Financial Stability Report suggests gross bad loan ratios could rise to 3% by March 2026 from 2.6% in September 2024, highlighting potential asset quality risks.

Sources: ICRA, Reserve Bank of India, S&P Global Market Intelligence

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