New Delhi, February 18, 2025: The banking sector in Q3FY25 faced greater-than-expected challenges due to subdued loan growth, rising funding costs, and increased credit pressures. Loan growth fell below 12%, influenced by weak credit demand and liquidity constraints, while deposit growth also struggled, exacerbating funding costs. These factors are expected to continue pressuring net interest margins (NIMs).
Asset quality showed signs of deterioration, especially in microfinance, unsecured loans, and Kisan Credit Cards, with slippages expected to rise. Larger private banks are likely to demonstrate earnings resilience, while mid-tier banks with high unsecured lending exposure may report weaker results. Public sector banks are expected to perform better due to stable credit costs and less NIM pressure.
