Margin trends

Bank profits will moderate in coming quarters

The economic rebound following the pandemic has led to an acceleration in credit growth for banks with lower defaults. However, the financial sector needs to brace for margin compressions in 2023-24 (FY24) as deposit rates catch up with lending rates. A rising tide lifts all boats, and that definitely seems the case at the moment. In Q1FY24, scheduled commercial banks (SCBs) saw a 35 per cent year-on-year (Y-o-Y) increase in interest income to Rs 4.5 trillion from Rs 3.35 trillion in Q1FY23. Interest income also grew 5.8 per cent sequentially over Rs 4.3 trillion in Q4FY23. Non-interest income grew to