Banks Expected to Post Healthy Growth in Q4FY26 but Face Margin Pressures and Risks

Mumbai, April 7, 2026: Indian banks are projected to record healthy growth in the fourth quarter of FY26, driven by strong credit demand and steady deposit mobilisation, according to an industry outlook by Nuvama. However, the report pointed out that margin pressures, elevated risks, and cost challenges could temper overall profitability and performance in the quarter.

Nuvama’s assessment noted that credit growth remains robust across retail and corporate segments, supported by improved business confidence, sustained consumption demand, and increased lending appetite among micro, small and medium enterprises (MSMEs). Deposit growth has also remained stable, providing banks with adequate liquidity to support expansion.

Despite these positive trends, banks are facing compression in net interest margins (NIMs) due to rising funding costs and competitive pricing in loans. Higher costs of funds, especially in the retail segment, are expected to put pressure on spreads, prompting banks to balance growth with profitability optimisation.

The report also highlighted that asset quality remains a watchpoint, with potential slippages in segments exposed to cyclical stress. While the overall non‑performing asset (NPA) ratio has remained contained, sector experts advised continued vigilance on credit underwriting standards to mitigate deterioration in stressed portfolios.

Digital and unsecured lending have contributed to growth, but they carry higher risk profiles, necessitating judicious risk management practices. Nuvama underscored the importance of robust monitoring systems and strong credit governance to ensure sustainable growth in these segments