JPMorgan’s India research arm, led by Anuj Singla, forecasts private banks’ NII to surge to 13% in 2026, a steep jump from the 5‑6% growth seen last year. This outpaces the consensus on 10‑11%, sending a clear signal that the sector will thrive amid higher rates.
FCNR deposits, a key liquidity source, exploded to $127 billion, smashing street forecasts of $60‑$80 billion and even JPMorgan’s high‑end projection of $82‑$100 billion. The windfall will be deployed over the next few quarters, nudging net‑interest margins down by 5‑15 basis points temporarily.
Credit growth remains the engine, projected at 14‑15% for the full fiscal year. The credit‑to‑deposit spread has narrowed from 500 basis points last year to about 120 bps in June, a trend that is expected to continue, keeping deposit growth from overtaking credit expansion.
Asset quality stays solid; delinquency rates are at a one‑to‑two‑decade low across credit cards, personal loans, and micro‑finance. Even with higher oil prices and uneven monsoons, the sector’s risk profile remains benign.
Looking ahead, the sector is poised to benefit from 50‑basis‑point rate hikes over the next 12 months, as Singla notes. Investors should monitor NII and pre‑provision operating profit, which could lift earnings by a low single digit in FY28.