Falling NII hurts private banks' profit growth, public peers do better

Private sector banks reported declining net profit year-on-year for the second consecutive period in the June quarter amid dwindling net interest income whereas their public sector counterparts continued to report double digit growth for the sixth consecutive quarter. For a sample of 17 private sector banks, net profit fell by a tad 0.6% to ₹48,115 crore compared with a 26.7% growth in the year-ago quarter. For the 12 public sector banks, net profit grew by 10.6% to ₹44,218 crore compared with a 16% growth a year ago.

For the total sample of 29 banks, net profit grew by a four-and-a-half year low of 4.4% to ₹92,333.5 crore in the June quarter. It was also the second consecutive quarter of single digit year-on-year growth. The share of PSU banks in net profit rose to 47.9% from 45.2% in the year-ago quarter.


The trend in net profit mirrors the deceleration in net interest income (NII), which fell by 0.1% to ₹1,98,905.7 crore. It was the first drop in at least 21 quarters. NII growth has been decelerating since the June 2024 quarter. NII has been under pressure amid repo rate cuts by the RBI as lending rates are adjusted at a faster rate than deposit rates thereby reducing the margin. With a gradual adjustment in deposit rates, pressure on NII is expected to recede in the coming quarters.

PSU Banks reported lesser pressure on NIIs compared with the private sector banks. For PSU banks, NII rose by 1.9% year-on-year to ₹1,06,358 crore in the June quarter. On the other hand, private sector banks recorded a fall of 2.4% in NII at ₹92,547 crore.