Indian banks' NIM to contract in FY24 as deposit costs rises: Fitch

Lenders should be able to offset impact by gradually passing on policy rate hikes to corporate loans: Agency

Indian banks' net interest margin (NIM) will be under pressure in the next financial year ending March 2024 (FY24) as they increase deposit rates to get funds for supporting high loan growth, said Fitch Ratings on Monday.

The Indian banking sector's average NIM-- an indicator of profitability--is expected to contract by about 10 basis points (bps) in FY24 to 3.45 per cent. This follows a 15 bp increase in FY23 to 3.55 per cent, but remains above that in prior years (FY17-FY22 average: 3.1 per cent), said Fitch.

This contraction was consistent with the lagged normalisation in deposit rates. Banks