Shares of major private lenders Kotak, IndusInd, and Axis Bank jumped following strong business updates for the second quarter. While credit and deposit growth remained robust, analysts warned of structural challenges in low-cost deposit momentum.
18.8%
Systemic Credit Growth
⏳ Time Machine
How today’s news fits into the bigger picture
2022
Rising Interest Rates
The RBI began hiking interest rates from record lows of 4.00% to combat post-pandemic inflation, pushing domestic borrowing costs up for all commercial banks.
June 2024
Credit-Deposit Gap Widens
The central bank raised serious concerns about the growing divergence between loan and deposit growth, warning banks to balance their portfolios.
July 2026
Repo Rate Set at 5.25%
The monetary policy committee adjusted the benchmark repo rate to 5.25%, stabilizing the borrowing and lending ecosystem across Indian banks.
Today
Kotak, Axis, and IndusInd Bank shares rallied following strong provisional Q2 business updates.
What happens next?
Full Q2 corporate earnings reports in mid-october will reveal the precise impact of funding costs on net interest margins.
On Tuesday, shares of prominent private lenders including Kotak Mahindra Bank, IndusInd Bank, and Axis Bank witnessed a sharp rally following the release of their second-quarter business updates. The reports highlighted resilient credit growth and healthy deposit accumulation, which was significantly aided by Foreign Currency Non-Resident (Bank) inflows. However, the update also revealed a persistent challenge that has plagued the banking sector for over a year: slowing momentum in low-cost Current Account and Savings Account (CASA) deposits. This structural mismatch forces banks to rely on more expensive term deposits, threatening to compress net interest margins in the coming quarters. Despite these margin pressures, institutional investors cheered the robust loan expansion numbers, driving a positive sentiment across the wider financial markets.
💭 If you're wondering…
Banks prefer current and savings accounts because they pay very low interest rates on these deposits, providing a highly cheap source of funding to lend out at higher rates.
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