New Delhi, Oct. 1 -- Bank margins are expected to improve from the third quarter of FY27 as fresh lending rates have increased across most loan segments, although margins could remain under pressure in the near term due to the impact of FCNR deposits, IIFL Capital said in a report.

"Margins should improve from 3Q/4Q onwards as fresh lending rates have inched up 2-24bps QTD across most segments," IIFL Capital said, pointing to a gradual improvement in lending spreads.

The brokerage also noted that the median one-year Marginal Cost of Funds based Lending Rate (MCLR) rose 7 basis points quarter-on-quarter in the second quarter.

The report, however, expects the second-quarter margin performance to remain subdued. "We expect FCNR to drag NI...