New Delhi, June 25 -- Declining interest rates are not favourable for banks' net interest margins in the short term. According to a report by PhillipCapital, the net interest margins (NIM) of banks are going to moderate in FY25 and FY26, before rebounding in FY27.

The report added that a 100 basis point cut in the repo rate and substantial liquidity in the system are conducive to deposit growth at cost-competitive rates.

The Reserve Bank of India (RBI) has reduced the repo rate by 100 basis points since February 2025.

The report highlights that Banks such as ICICI Bank, DCB Bank, AU SFB, and Axis Bank are expected to experience minimal impact on NIM compression, while others like HDFC Bank and SBI may see a moderate impact. Conversely,...