InvestorQ : Is it true that banks could face pressure on margins in the coming months?
vidhya Laxmi made post

Is it true that banks could face pressure on margins in the coming months?

Answer
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sarah Leo answered.
2 weeks ago


This has been pointed out in a research note by ICICI Securities. According to the note on the Indian banking sector, the second quarter of FY21 could mark the beginning of downtrend in net interest margins or NIMs as cost pressures build up.

What would be interesting is for the private banks that have thrived on healthy NIM spreads over the last few years. It could be a big hit for Indian banks. Of course, banks and financials are meanwhile awaiting greater clarity on NPA recognition and loan restructuring norms.

If the Supreme Court rules in favour of NPA standstill it will favour the banks and then banks could show good numbers on paper. Nomura estimates credit book expansion between 1.6% and 15.6% with negative growth for Kotak Bank.

However, IIFL Securities does not expect this to be a major challenge. It expects that the lower cost of deposits would compensate for this pressure on yields and NPAs and favour NIMs of banks. While NIMs may not improve, they don’t see much damage.