New Delhi, April 2 -- Indian banks could face increased margin pressure as liquidity conditions tighten, according to a report by Fitch Ratings, which highlighted constraints on the Reserve Bank of India's (RBI) ability to inject liquidity amid currency volatility concerns.

Fitch said that "margin pressure for Indian banks could increase, as the Reserve Bank of India's (RBI) flexibility to inject local-currency liquidity into the banking system has narrowed amid efforts to contain rupee volatility."

The report warned that sector margins may decline further if global risks persist. It noted that "sector margins could decline by 20bp-30bp below our current 3.1% forecast for the financial year ending 31 March 2027 (FY27) if higher funding ...