Updated by Author on 30 June 2025-wl-2931-Credit Growth or NIM: Horns of a Dilemma

This article studies the implications of robust credit growth for Indian banks, particularly on asset yields, cost of funds and balance sheet composition. The decline in net interest margins (NIM) has been stronger for banks with faster asset growth. Private sector banks earn a higher spread between fresh loans and deposits. We highlight the risks banks face when they alter their portfolio structures in response to pressure on NIM.