Business: The earnings of banks are expected to increase in the coming months. According to the report of Systematics Research, the increase in profit of banks can be due to four reasons, higher lending speed, falling interest rates on deposits, reduction in cash reserve ratio (CRR) and less slippage in unsecured loans (like personal loans).

Reduction in cases of non-repayment of loans in microfinance institutions
It has been said in the report that banks are currently resetting the interest rates offered on deposits, which will reduce their expenses and increase profits. Also, there has been a decline in loan non-payment cases in Microfinance Institutions (MFIs), which will further improve the condition of banks.

Net interest margin of banks may decline
According to the report, the Net Interest Margin (NIM) of banks i.e. interest income may remain slightly lower in the second quarter of the current financial year, but it is expected to remain stable going forward. Some banks have even performed better than expected. For most banks, the interest (yield) on loans has decreased slightly, but its impact was less because the interest expense on deposits and loans for banks has also decreased.

Benefits of changes made in fixed deposits
The report says that banks will see the full benefit of the changes in interest rates on fixed deposits in the second half of the financial year 2026. Also, the effect of reduction in cash reserve ratio will also be visible gradually. Bank management estimates that profit margins will remain stable in the third quarter and will start improving from the fourth quarter, provided there is no further cut in interest rates.

GST reforms and festive season increased demand for loans
While the pace of credit was slow in the first quarter, it increased in the second quarter. The reason for this is the reduction in GST rates and increasing demand during the festive season. For this reason, credit growth increased to 11.4 percent on annual basis.

What do the figures say?
Although banks’ profits were expected to be weak in the second quarter, the results were better than expected. According to Reserve Bank of India data, by October 3, 2025, the total debt of the banking system increased by 4.2% on a quarterly basis and 11.4% on an annual basis. Whereas deposits registered an increase of 2.9% on quarterly basis and 9.9% on annual basis. The condition of deposits in public banks remained generally good, but overall the pace of deposits is still slower than that of loans.