Indian banks are expected to witness a continued decline in Net Interest Margins (NIM) over the next few quarters, potentially shrinking by another 30 basis points. After reaching a peak of 3.3% in the third quarter of the financial year ending March 31, 2023, NIMs have steadily decreased to 3.13% in Q2FY24, primarily due to a rise in the cost of funds. Factors such as the Reserve Bank of India’s policy rate increases, resulting in higher deposit costs, and regulatory actions on unsecured lending have contributed to this trend. The trend is anticipated to persist, with NIMs likely returning to levels seen around Q2FY22.
Indian Banks Face Further Compression in Net Interest Margins
![](https://affairsace-media.s3.ap-south-1.amazonaws.com/2023/12/18152617/1688406565-8011.jpg)