Q4 FY25 Banking: Slower Loan and Deposit Growth, Thin NIMs
Why in the news
January-March 2025 was a tough quarter for lenders: credit and deposits grew more slowly, margins shrank and money was tight, even though March is normally a strong quarter.
Key facts
- An RBI 25 bps rate cut in February cut lending yields, but deposit costs stayed high, squeezing NIMs.
- Kotak Institutional Equities saw no short-term driver for margin recovery.
- Non-food credit grew 11.2% (11.1% in Q3).
- Stress rose in small-ticket personal loans and microfinance; tighter rules hit unsecured lending.
Q4 versus Q3 FY25
| Parameter | Q3 FY25 | Q4 FY25 |
|---|---|---|
| Loan growth (PNB, BoI, IDFC First, Yes, Bandhan, IDBI, South Indian) | 12-22% | 8-20% YoY |
| HDFC Bank loan growth | 3% | 5.4% |
| System deposit growth | 11.5% | 10.5% |
| Individual banks’ domestic deposit growth | 14-29% | 7-25% YoY |
| HDFC Bank deposit growth | 15.8% | 14.1% |
| Average weighted lending rate | 9.85% | 9.78% |
Concerns
- IndusInd Bank advances grew only 1.4% YoY, down 5.2% QoQ, due to a corporate loan pullback.
- ICRA flagged asset-quality risks, notably for banks with large unsecured books or heavy risky-retail exposure.
- Profitability in FY26 could be hard to defend as credit demand and deposit mobilisation stay weak.
Exam angle
- Terms: NIM, YoY versus QoQ, non-food credit.
- Agency warning on asset quality: ICRA.