Banks’ profitability to reach inflexion point in FY25, moderate further in FY26

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The rapid improvement in financial metrics of banks seen over FY21-FY24 is likely to have peaked and is expected to reach an inflexion point in FY25, followed by further moderation in FY26, India Ratings & Research said today.

“Near- to medium-term challenges for the banking sector include managing elevated loan-to-deposit ratios (LDRs), the potential impact of draft norms on liquidity coverage ratios (LCRs), higher provisioning for the infrastructure sector, and the implementation of expected credit loss (ECL) norms,” said Karan Gupta, head and director of financial institutions at India Ratings.

“Profitability, while remaining healthy, is already at an inflexion point in FY25 and is expected to moderate further in FY26, with rising slippages and higher credit costs anticipated compared to FY24 levels, which were at decadal lows,” he said.

(This is a developing story. Please check back later for the full version.)