SBI, HDFC, ICICI, Kotak Bank: Likely NIM impact as RBI cuts rate by 25 basis points

Banking shares such as State Bank of India (SBI), HDFC Bank, ICICI Bank and Kotak Mahindra Bank rose up to 2 per cent in Friday's trade, while others such as Federal Bank, IndusInd Bank, Axis Bank and YES Bank fell up to 1 per cent, as the six-member monetary policy committee (MPC) announced a 25 basis points rate cut in its Friday review. 

In the September quarter, banks had delivered some margin related surprises, with many of them reporting an earlier-than-expected recovery, even after absorbing the full impact of the 50 bps rate cut in June 2025. 

"With the latest 25 bps cut, we expect the effect on NIMs to remain manageable and limited, taking cues from banks’ performance during the 100 bps rate reduction implemented by the regulator between February to June 2025. We anticipate that the impact of CRR cuts and ongoing TD repricing will offset the yield pressure arising from the recent rate cut," said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.  

Banks will like the policy decision overall but are unlikely to respond very positively to the rate cut since their NIMs will come under pressure and they will face difficulties in mobilising deposits if deposit rates are lowered, VK Vijayakumar, Chief Investment Strategist, Geojit Investments said.

Among bank stocks, SBI rose 1.45 per cent to Rs 961.80. IDFC Bank, rose 1 per cent, while   Bank of Baroda, HDFC Bank, ICICI Bank and Kotak Mahindra Bank added up to 1 per cent. YES Bank was the worst Bankex performer, falling 1.05 per cent to Rs 22.53. Axis Bank, Federal Bank and IndusInd Bank also declined up to half a per cent.   

After bottoming at 9 per cent in May, credit growth has shown a sustained and broad-based recovery, rising to 9.5 per cent in June, 10 per cent in the July-September period, and 11.4-11.5 per cent in the months of October and November.

On the growth front, Kulkarni said the latest data indicates revival in credit growth momentum, supported by improved consumption demand. Thus far, credit growth has been driven by the retail segment, with banks continuing to remain selective on the corporate side; we expect stronger growth delivery in H2. 

"Asset quality concerns appear to be easing, with the unsecured segment showing better trends, which should sustain, driving credit costs lower. Despite the rate cut, we continue to believe the earnings-downgrade cycle is now behind and expect earnings growth to improve from here on,” Kulkarni said. 

Meanwhile, the RBI Governor announced Open Market Operations of Rs 1 lakh crores with Rs 50000 on December 11 and another Rs 50,000 crore on December 18. Also, a forex buy sell swap of $5 billion is to be done on December 16. A total of Rs 1,45,000 crore of liquidity, thus, is expected to be injected in the next 15 days. This is for the month of December only and further measures are expected in the fourth quarter of financial year, said Murthy Nagarajan, Head-Fixed Income, Tata Asset Management.  

"For Indian investors, today’s reaction – softer 10-year yields, Nifty above 26,000, and broad gains in financials, autos, NBFCs and realty – confirms this as a “Goldilocks” cut: supportive for growth without threatening macro stability. For portfolios, our bias from here: accumulate 5–7 year G-secs and maintain an overweight in well-capitalised PSU banks and quality retail-credit franchises as the core expression of this easing cycle,” said Karthick Jonagadla, and Founder of Quantace Research.

Despite having surprisingly strong Q2FY26 GDP numbers, the RBI has realised that the external environment is very challenging and, going forward, there are many factors that can derail the current growth momentum.

"Thus, the central bank has clearly indicated that stimulating economic growth, infusing more liquidity in the system, improving credit growth, and facilitating smooth transmission of rate cuts are the primary goals at this juncture.," said Ajay Kejriwal, Executive Director of Choice International.