Mumbai, January 29, 2025: Indian banks are facing increasing margin pressure due to high interest rates and slowing loan growth, according to a recent report by S&P Global. The Reserve Bank of India’s (RBI) measures to curb retail lending have led to a slowdown in credit growth, which in turn is putting pressure on banks’ profitability. Additionally, banks are being forced to increase provisions for bad loans, contributing to an uptick in non-performing assets (NPAs), which further strains their financials.
The report also highlights that the competition for deposits among banks is intensifying, with expectations of rate cuts in the near future. As a result, net interest margins are expected to decline by around 20 basis points to 3% over the next few years. This trend underscores the challenges Indian banks face in managing liquidity and maintaining profitability while navigating the evolving economic environment.
