Banks are likely to see a further compression in their net interest margins (NIM) in the second quarter of the current fiscal (on a sequential basis) due to higher cost of deposits. In the April-June quarter, banks’ NIM – the difference between the interest earned and the interest paid by a bank – declined on a sequential basis.
Analysts expect banks to maintain a healthy profit after tax (PAT) and asset quality is likely to improve in the April-June quarter, with slippages under control. Even credit costs will remain stable, with bank credit growth expected to be in the range of 15-17 per cent on year-on-year (YoY) basis and deposits rising by 12-13 per cent in the quarter.