Business · Companies · 1 hr ago
Bond yields expected to slow Indian banks’ September-quarter profit growth
Indian banks are expected to report slower profit growth for the quarter ending in September, despite rising income from loans.
Estimates put banks’ combined net interest income, the difference between interest earned and paid, up 11.5% from a year earlier, while operating profit and net profit are expected to grow by about 10%.
Higher bond yields are likely to reduce treasury income, which comes from banks’ investments in bonds.
The Reserve Bank of India’s 2026 scheme attracted more than $127 billion in foreign-currency deposits, helping banks increase funding as loan demand grows.
Those deposits could also squeeze profit margins and lower banks’ share of low-cost current and savings deposits in the short term.
Stable asset quality is expected to keep credit costs low, while the outlook for non-bank finance companies remains strong.
Investors will watch how banks deploy the funds and what they say about loan demand, income and possible stress in some types of lending.
Indian banks are expected to report slower September-quarter profit growth as higher bond yields weigh on treasury income.
Nifty 50 banks are forecast to post 11.5% year-on-year growth in aggregate net interest income.
Growth in pre-provision operating profit and net profit is expected to be around 10%.
The RBI’s FCNR-B deposit swap scheme collected more than $127 billion, supporting deposit growth but potentially pressuring CASA ratios and net interest margins.
Credit costs are expected to remain benign amid stable asset quality.
- Who
- Nifty 50 banks and other banks covered by brokerages.
- What
- Banks are expected to report slower profit growth in the September quarter as hardened bond yields pressure treasury income.
- When
- September quarter; the article was published on October 14, 2026.
- Where
- India.
- Why
- Higher bond yields are expected to weigh on treasury income; FCNR-B inflows may also put pressure on CASA ratios and net interest margins.
This story does not have two clearly opposing sides.
The RBI’s 2026 FCNR-B deposit swap scheme collected more than $127 billion.
Banks are expected to report slower profit growth as hardened bond yields pressure treasury income.
- NII growth forecast
- 11.5% year-on-year for Nifty 50 banks
- Profit growth forecast
- Around 10% for pre-provision operating profit and net profit
- FCNR-B collections
- More than $127 billion
- Loan growth
- 19.1% year-on-year and 6.6% sequentially across provisional updates for 30 banks
- Deposit growth
- 15.8% year-on-year and 5.8% sequentially across provisional updates for 30 banks
What people are saying
For large private banks, these inflows may dilute reported CASA ratios and create a short-term drag as funding raised at attractive offshore spreads takes time to be deployed
Provisional business updates for 30 banks show loan growth accelerating sharply to 19.1% year-on-year and 6.6% sequentially, and deposit growth to 15.8% year-on-year and 5.8% sequentially, aided meaningfully by the FCNR-B mobilisation drive
NIMs may remain compressed in the September quarter but should gradually recover in the second half as banks retire high-cost liabilities and deploy liquidity into loans
Key metrics to monitor are deployment trajectory and yields on FCNR deposits, impact of rate hike, upcoming ECL transition and any stress in SME and unsecured loans