NIMs of Indian banks to gradually improve led by re-pricing of term deposits

Indian banks are set for a “decisive profitability inflection point” as net interest margins (NIMs) begin to recover after several quarters of compression, according to a latest sector report by Nomura.

- TBG NETWORK

Nomura said that the recently reported quarterly results indicate that “the downcycle for NIMs has bottomed out, and we expect NIMs to gradually improve led by a repricing of term deposits.” The brokerage expects margins to strengthen over the next two years. With rate-cycle pressures easing, Nomura wrote: “We expect NIMs to improve by approx 17bp over FY26-28F... While additional rate cuts may delay margin recovery, we expect repricing of term deposits and pickup in growth in the higher-yielding assets to largely offset the impact.” Improvement in the unsecured retail and microfinance segments is also aiding the outlook.