Overview

• Brokerages forecast an approximately 8% year-on-year decline in banks’ Q1 FY26 profit after tax, marking one of the weakest quarters since FY22.
• The RBI’s 100bps of rate cuts since February have driven rapid repricing of external benchmark loans, squeezing net interest income for most lenders.
• System-wide loan growth slowed to 9.6% year-on-year by mid-June while deposit growth remained subdued at around 10.4%, reflecting weaker credit demand.
• Elevated credit costs are anticipated, especially in unsecured lending segments and among mid-sized banks facing higher slippages.
• Strong trading and mark-to-market gains from falling government bond yields are expected to partially offset weaker core income, prompting investors to favour large private lenders such as Axis Bank, ICICI Bank and SBI.