Mumbai, Aug. 9 -- While lauding the robust health of India's banking system, Reserve Bank of India Governor Sanjay Malhotra had last week flagged a decline in the sector's margins for the one year period ended June 2026, and lenders see little respite just yet.

India's banking system net interest margin (NIM) was at 3.21% in June 2026, as against 3.26% a year ago, as per data by the central bank.

While some expect the margins to stabilize after the June quarter squeeze, others see more pressure ahead, as deposit costs remain high and strong credit growth keeps the race for funds intense. Margins are also seen under pressure from flows under the foreign currency non-resident FCNR(B) deposit scheme.

"We believe this is a cycle bottom as ...