Indian bank margins face sustained pressure in FY27 as lenders navigate geopolitical headwinds and accounting transitions. The March quarter revealed sharp Net Interest Margin compression for state-owned banks, with SBIN's NIM falling 17 basis points to 2.81 percent and Union Bank declining 12 basis points to 2.64 percent following December's repo rate cut. Private sector peers demonstrated resilience, with ICICI Bank and HDFC Bank maintaining stable margins through better deposit repricing capabilities. Systematix warns that West Asia conflict impacts may intensify in the second half of FY27, though government credit guarantee schemes provide some cushion. Asset quality metrics remained largely stable despite geopolitical concerns, with most banks maintaining net slippage ratios below 80 basis points.
