Bank of India expects NIM to rise to 2.55% in H2 FY27 after RBI rate hike
Bank of India expects its global net interest margin (NIM) to rise to around 2.55% in the second half of fiscal year 2027 (FY27) from 2.47% in the September quarter, as lending rates reprice faster than deposit costs following the Reserve Bank of India’s 25-basis-point repo rate hike, the bank said during its press conference.
NIM measures the difference between the interest a bank earns on loans and investments and what it pays on deposits and borrowings.
The bank said 66% of its advances are linked to external benchmarks, allowing it to pass on the latest rate increase immediately. Deposit rates, however, are expected to reprice more slowly, with around 60% of the bank’s term deposits in the 12–18 month maturity bucket.
Rajneesh Karnatak is the managing director (MD) and chief executive officer (CEO) of Bank of India.
“With this cushion around, in the next 2 to 3 quarters there should definitely be some improvement in the NIMs for the banks,” management said.
The bank’s global NIM stood at 2.47% in the September quarter, compared with 2.41% a year earlier. Domestic NIM was above 2.70%, while the international book, which accounts for about 15% of the bank’s overall book, had a NIM of around 1.14%, weighing on the consolidated margin.
For FY27, Bank of India expects global advances to grow by 15–16% and global deposits by 16–17%. The guidance comes after global advances grew 20.58% year-on-year to ₹8.55 trillion and global deposits rose 21.59% to ₹10.38 trillion in the September quarter. Global business increased 21.13% to ₹18.93 trillion.
The bank reported net profit of ₹3,202 crore in the quarter, up 25.34% year-on-year. Operating profit rose 33.19% to ₹5,089 crore, while net interest income increased 18.52% to ₹7,007 crore. Gross non-performing assets (NPAs), or loans where borrowers have stopped meeting repayment obligations, fell to 1.60%, while net NPA stood at 0.42%.
On Foreign Currency Non-Resident (Bank) deposits (FCNR(B)), the bank said it had mobilised $2.2 billion, equivalent to around ₹21,000 – 22,000 crore on the liability side.
FCNR(B) deposits are foreign-currency fixed deposits offered to Non-Resident Indians and Persons of Indian Origin. Banks rushed to raise them after the Reserve Bank of India (RBI) introduced a temporary swap facility that reduced the cost of hedging the foreign-currency deposits, making this funding more attractive.
Mint earlier reported that rising FCNR(B) deposits strengthened banks’ liquidity but squeezed NIMs as lenders struggled to deploy the foreign-currency funds into loans. The resulting surplus liquidity increased funding costs relative to loan yields, weighing on margins in the September quarter.
Bank of India said 80% to 90% of its FCNR(B) deposits came through the leveraged route, which allows up to 9x leverage. The bank added that most lenders have seen the same trend.
The public sector lender said it pays 6.25% on FCNR(B) deposits of up to three years and 6.5% on deposits of up to five years. “It is fully hedged also, and there is no CRR and SLR as per RBI guidelines,” the bank’s management said.
Cash Reserve Ratio (CRR) is the portion of deposits banks must keep with RBI, while Statutory Liquidity Ratio (SLR) is the portion they must hold in specified liquid assets.
“Whatever we garner from FCNR(B) deposits, we can use it in any of the geographies where it is required,” the bank’s management added. Bank of India’s international business had crossed ₹2.8 trillion as of 30 September.
