Canara Bank expects NIM pressure to ease by Q3 as deposit rates soften

PUBLIC sector lender Canara Bank expects its net interest margin (NIM) to remain under pressure in the first half of FY26 due to the impact of falling repo rates on its lending portfolio, while deposit rates remain elevated.

- DIPAK MONDAL@ New Delhi

However, the bank is optimistic about softening deposit rates by the third quarter, which could support margin stability.

Talking to New Indian Express, Canara Bank MD and CEO K Satyanarayana Raju said the lender had to pass on the benefits of policy rate cuts quickly to nearly 44% of its loan book. However, it faces a lag in reducing interest rates on existing term deposits due to contractual obligations. "That is the pain point," he said, adding that retail term deposit rates have yet to reflect the easing trend seen in bulk deposits.

The bank maintained that its NIM guidance for FY26 remains in the 2.71% to 2.73% range, down slightly from the 2.80% it clocked in the previous fiscal.