The bank’s yields on advances have moderated slightly in FY25 due to efforts to enhance portfolio quality and increase MSME ticket sizes, which has resulted in a yield sacrifice. Despite previous repo rate hikes and anticipated cuts, deposit costs have not increased significantly. The bank expects to maintain a net interest margin (NIM) of 3.8% to 3.9% in FY26, with deposit costs ranging from 5.9% to 6%.
The bank’s loan portfolio is heavily focused on retail, agriculture, and MSME segments, which account for 93% of total advances, up from 91% in FY24. The bank plans to continue its focus on retail and MSME, with a smaller emphasis on agriculture. It may also re-enter the corporate segment with limited exposure once risk management systems are fully implemented.
To support growth, the bank is centralizing credit delivery through a new credit management center, which will prioritize RAM growth. The bank is also targeting significant growth in current and savings accounts, aiming for 1.5 times the growth of term deposits. The bank’s substantial gold loan portfolio, which accounts for about 40% of assets, is expected to provide insulation to the overall asset yield, supporting NIM stability. Gold loan yields are less sensitive to broader interest rate movements, which will help the bank maintain its NIM.
Overall, the bank’s strategy is focused on maintaining a strong NIM, growing its retail and MSME segments, and managing its risk exposure. The bank is also prioritizing the growth of its current and savings accounts, and leveraging its gold loan portfolio to support its overall asset yield. With a focus on improving portfolio quality and managing risk, the bank is well-positioned for FY26. The bank’s ability to maintain a stable NIM and grow its key segments will be crucial in achieving its goals for the upcoming year.