Canara Bank expects pressure on NIMs in FY26 due to expectation of more rate cuts: CEO

Canara Bank

Canara Bank’s managing director and chief executive officer, K.Satyanarayana Raju on May 8 said the bank may face pressure on the net interest margins (NIM) in the financial year 2025-26 due to further rate cut expectations by the Reserve Bank of India.

“For the next quarter, we are expecting that again stress on NIMs will continue because already two rate cuts are over and we are expecting minimum two more,” Raju said during the post-Q4 earnings press call.

He said that the rate cut benefits pass the customers linked to external benchmark immediately, but passing on deposit rates it takes six months time, hence there is pressure.

The bank has given the NIMs guidance of 2.75-2.80 percent for the financial year 2025-26.

In January-March quarter, cumulative NIMs of the bank has reduced by 3 basis points (Bps) on quarter and 25 bps on a yearly basis. The lender reported a cumulative NIMs of 2.80 percent in Q4FY25, as compared to 2.83 percent in a quarter ago period, and 3.05 percent in a year ago period.

There is a growing consensus among market participants that the RBI will cut more rates in the coming policies, in order to support growth amid a tariff war, with a cooling inflation providing the elbow room for lower rates.

On April 9, the central bank reduced the key repo rate by 25 bps, the second such cut in a row, on a benign inflation outlook and moderate growth. It also shifted its stance from ‘neutral’ to ‘accommodative’.

On April 21, Moneycontrol reported that bankers are assessing the potential impact of further rate cuts by the RBI during the rest of the year on their net interest margins.