Rate cuts drive stronger loan growth, boosting profits for India's banks

By Harshita Swaminathan, Rachel Yeo and Justina T. Lee

  India’s top banks should post better loan growth numbers as the central bank’s rate cuts continue to take effect, after largest private sector lender HDFC Bank Ltd. beat analysts’ estimate on back of strong loan growth, signaling it’s emerging from a period of deliberate slowdown. 

 

Banks will see loan growth pick up in the October-December quarter after the RBI’s rate cuts last year and the 100 basis points cut to the cash reserve ratio in June. Lending margins should also stabilise, with Jefferies expecting a slight expansion sequentially as the cost of funds may be lower.  

   

For IndusInd Bank Ltd., investors will focus on how the new management plans to turn around the bank after last year’s ₹1,960 crore ($217 million) accounting discrepancy led its chief executive officer to resign. The bank said in a pre-earnings update that net advances at the end of the quarter slid 13 per cent on-year, and deposits fell 3.8 per cent. 

 

Over the weekend, HDFC Bank reported better loan growth than a year ago and beat profit estimates. Its CFO also said they would grow faster than the industry average in the 2027 financial year. ICICI Bank Ltd missed net income estimates and reappointed CEO Sandeep Bakhshi for two more years, removing a key overhang over the stock.  

 

Markets will also watch for commentary from India’s large pharmaceutical manufacturers. Semaglutide, Novo Nordisk A/S’s weight-loss drug, will lose patent protection this year in several large markets. An Indian court in December allowed Dr Reddy’s Laboratories Ltd. to manufacture and export the drug.