Net interest margin, a key profitability gauge, is facing pressure amid the softer interest rate cycle.
Chief executives of these lenders are expecting the full impact of the policy rate cut in December to play out in the fourth quarter and therefore, are taking steps to realign their business strategy to offset it.
Federal and Yes Bank have slowed retail lending, especially low-yielding housing loans, as well as lending to large corporations which seek fine rates.
South Indian Bank too is planning to take a little extra risk and lend to lower-rated corporate customers to boost its margin, backed by the confidence of multi-decade low non-performing assets ratio.
“We are seeing increasing benefits from a calibrated shift in asset mix towards segments that offer superior risk-adjusted returns,” Federal Bank managing director KVS Manian said last week after announcing the quarterly numbers.
The bank’s net interest margin for the third quarter ended December 31 was 3.18%, compared with 3.06% in the preceding quarter. The bank grew the share of medium-yielding assets to 47.7% from 46% over the year. Among medium-yielding assets is gold loans which rose 12% to Rs 35,221 crore.The bank brought down the share of low-yielding assets like housing loans to 44.3% from 45.3% even as overall advance expanded 11% on-year to Rs 2.56 lakh crore.
