New Delhi, July 10 -- The Indian banking sector is witnessing a steady pickup in deposit growth, but banks are likely to report a decline in their net interest margins (NIM) in the first quarter of FY26, according to a report by Phillip Capital.

The report noted that systemic deposit growth is gaining momentum, helping improve the credit-to-deposit ratio. Based on business updates released so far, the overall credit growth stands at 0.4 per cent on a sequential basis.

It stated "banking universe will see 1 per cent yoy (-1.5 per cent qoq) growth in NII. Sector NIM will decline 10bps qoq /30bps yoy as cost of funds remains stable"

The report highlighted muted growth in Net Interest Income (NII) across the banking sector due to weak cred...