loader2
Login Open ICICI 3-in-1 Account

Open ICICI
3-in-1 Account

Manage your Savings, Demat and Trading Account conveniently at one place

+91

BLOG

RBI Policy Impact on BFSI: Staying Constructive on the Banking Sector

ICICIdirect Research 05 Dec 2025 DISCLAIMER

The RBI's 25-bps reduction in the repo rate signals continued easing cycle and is expected to support operating metrics over the medium term. 
While margins are likely to see improvement in Q3FY26, the rate cut could defer the anticipated pace of expansion by one to two quarters as transmission flows through the system. However, the broader macro backdrop remains favourable. 
With confidence in economic activity strengthening, industry credit growth is estimated to remain robust at 11.5–12%, underpinning earnings momentum.
The liquidity infusion announced by the RBI is expected to provide an additional buffer, easing funding pressures and helping cushion near-term margin volatility.
Within lenders, PSU banks appear comparatively well positioned as higher proportion of MCLR-linked loan portfolio should enable smoother rate transmission and mitigate fluctuations in margins. Further, relatively comfortable credit–deposit ratios offer headroom to sustain growth without significant funding strain.
Declining yields are expected to translate into treasury gains, aiding profitability. 
While investor sentiment toward PSU bank stocks has softened recently after signals that neither an increase in the FDI limit nor consolidation among state-owned lenders is likely in the current fiscal. However, the long-standing aspiration to eventually create a larger, more competitive public-sector bank leaves room for consideration in future.
Overall, sustained momentum, coupled with strengthened balance sheet, is expected to reinforce investor confidence and aid valuations.

Download ICICI Direct app

Invest, Track, and Manage your Portfolio Anytime, Anywhere

Download ICICI Direct app

Invest, Track, and Manage your Portfolio Anytime, Anywhere