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Banking industry poised for sustained recovery driven by credit off-take and margin recovery

ICICIdirect Research 24 Oct 2025 DISCLAIMER

Margins to bottom out, supported by CRR cut and deposit repricing: Bank NIMs are expected to bottom out as the phased CRR cut releases liquidity and reduces funding costs. With deposit repricing now aligning and rates gradually easing, margins are likely to stabilize, paving the way for recovery from H2FY26.

Buoyant credit growth driven by retail & MSME segment: Retail credit demand is projected to rebound and sustain overall credit growth trajectory. While GST and rate cuts are expected to boost consumption led credit demand, anticipated trade pacts is seen to boost credit off-take from MSME segment. Corporate credit remains selective; thus, overall systemic growth is set to sustain momentum.

Future rate cuts: credit growth to outweigh margin volatility: While the potential for further interest rate cuts could cause temporary margin volatility, combined benefits of deposit repricing, CRR-driven liquidity, and government measures along with stronger credit offtake in a low-rate environment should outweigh this volatility — supporting asset growth, higher interest income, and steady earnings upcycle for banks.

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