SCBs Spread Narrows On Outstanding Business- Indicates Further NIM Contraction: CareEdge Analysis

CareEdge Research Report

In August 2024, scheduled commercial banks spread between the outstanding weighted average lending rate and weighted average domestic term deposit rate dropped marginally by 1 bps to reach 2.96% in August 2024 indicating that net interest margins would likely contract further in Q2 FY25.

• The SCBs Lending Rate on outstanding rupee loans stood steady at 9.89% sequentially, in contrast, the deposit rate on o/s rupee term deposits increased marginally by 1 bps month-on-month to touch 6.93%.

• The outstanding PSB spread has been compressing over the last year, dropping by 2 bps sequentially, touching 2.15% as of August 2024, while the PVBs spread stood flat at 3.99%.

• Meanwhile, the one-year median Marginal Cost of Funds-based Lending Rate increased by 5 bps on month-on-month basis and stood at 8.95% as of September 2024.

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