Shriram Finance sees NIM at 8.5% by FY26-end despite RBI's rate cuts

Shriram Finance expects NIM to bounce back to 8.5 percent by FY26-end

Shriram Finance reported a sequential moderation in its net interest margin (NIM) to 8.11 percent in the April–June quarter, down from 8.25 percent in the previous three months and 8.79 percent a year ago. Going ahead, the management remains confident of seeing 8.5 percent NIM for FY26.

The margin compression was largely driven by the 100 basis point cut in the repo rate by the Reserve Bank of India’s Monetary Policy Committee so far in 2025, which has started impacting lending yields across the system. Despite the short-term dip, the company remains confident of a rebound.

Speaking on the post-results call, Y S Chakravarti, MD & CEO, said that several levers are in place to support margin improvement over the course of the year. “Our incremental borrowing cost is now at 8.36 percent, while the cost of funds in the existing book is 8.86 percent. So, there is a visible reduction in the rate at which we’re able to raise funds,” he said.

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To further ease funding pressures, Shriram Finance has also cut its deposit rates by 40 basis points, effective from the first week of August. This move, management believes, will begin reflecting in lower borrowing costs in the quarters ahead.

However, the benefit from these measures will flow in gradually due to the company’s borrowing profile. “Around 85 percent of our borrowings are on fixed terms, while only 15 percent are floating-rate. The floating portion will see the benefit immediately, but fixed borrowings will take six to twelve months to reprice,” Chakravarti noted.

On asset quality, credit costs came in at 2 percent for the quarter, lower than the earlier guidance range of 2.2 to 2.4 percent. When asked if this would lead to a revision in the full-year outlook, management clarified that credit cost is expected to remain around 2 percent for FY26.

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