India, Nov. 11 -- According to a recent research report by Motilal Oswal Mutual Fund, banking stocks continued to show strength, with the Bank Index rising 5.75 per cent in October, and posting 3.24 per cent, 4.88 per cent, and 12.24 per cent growth across the 3-month, 6-month, and one-year periods, respectively. The trend indicates that the banking sector is in a visibly stronger phase. Credit and deposits are growing, regulators are loosening liquidity constraints, the Government and central bank are talking about consolidation, and top banks (led by the State Bank of India) are aiming for global scale.

However, there are immediate concerns. According to some experts, the pressure on net interest margins will continue in the next quart...