New Delhi, Oct. 25 -- Kotak Mahindra Bank expects its net interest margins to gradually improve in the second half of the fiscal year as the impact of lower deposit costs begins to reflect, Group Chief Financial Officer Devang Gheewall said.

During the bank's Q2 earnings media call, the management said that the full benefit of deposit rate cuts would start flowing through over the next two quarters, helping offset the impact of the Reserve Bank of India's earlier repo rate cuts on its margins.

"Assuming no further rate cuts, the effect of the repo rate cut has already been reflected in Q2. As deposits start getting repriced at lower rates, we will see gradual improvement in margins in Q3 as well as Q4," the management said.

Kotak had e...