Archive · 2 Oct 2025
Indian Banking Sector to Recover Earnings by FY26
The Indian banking industry is expected to start making more money again in the second half of the financial year 2026, after a tough period where profits were down.
This is because it is expected that borrowing costs will be lower, which could help banks.
Banks, especially private ones, may see some declines in profits in the short term but the overall trend is positive.
Small finance banks also face challenges, but this is expected to improve.
Indian banking sector is set to see an earnings recovery in 2HFY26.
Systemic credit growth at 10.3% (YoY) in September.
Full-year credit growth for FY26 projected at 11% (YoY).
Private sector banks under coverage are expected to report a 7.3% (YoY) decline in net profit for Q2FY26.
Public sector banks (PSBs) are also expected to post weaker numbers.
- Who
- Indian banking sector, private and public lenders, and small finance banks
- What
- Expected earnings recovery in the second half of FY26 after a period of margin pressure and decline in profitability.
- When
- The second half of FY26, according to a recent report
- Where
- Indian banking sector
- Why
- Expected due to lower borrowing costs, GST rate cuts, and income tax relief
Impacted by Muted Performance
Projected Recovery
Earnings
Impacted by Muted Performance
Private and public lenders seeing declines in net profit in Q2FY26
Projected Recovery
Earnings are expected to recover in the second half of FY26
Credit Growth
Impacted by Muted Performance
The report highlights demand softness
Projected Recovery
Credit growth projected to improve in FY27
- Credit Growth (YoY)
- 10.3% as of September
- FY26 Credit Growth (YoY)
- Projected at 11%
- FY27 Credit Growth (YoY)
- Expected to improve to 12.5%
- Banking Sector Earnings CAGR (FY26-28)
- 17.7%
- Private Bank Earnings CAGR (FY26-28)
- 19.8%
- Public Sector Bank Earnings CAGR (FY26-28)
- 15.2%
