Indian Bank makes a corporate announcement

Q3 FY25’s domestic NIM rose 8 bps QoQ to 3.57% from 3.49%, but the reported data does not provide a formal split between deposit repricing and fresh lending. ^[1]

Rate impact

Thus, the improvement was driven primarily by the 15 bps increase in yield on advances, which more than offset the 5 bps rise in cost of deposits. On this simple two-variable bridge, the net benefit was 10 bps, versus the reported 8 bps NIM expansion; the small difference is consistent with other earning assets, funding mix, balance-sheet mix and rounding, rather than being a separately reported attribution. ^[1]

Term-deposit repricing versus fresh loan growth

The reported disclosures do not quantify how much of the 8 bps NIM increase came from:

• repricing of the existing term-deposit book; or
• higher-yielding fresh loans or growth in the loan book.

Term deposits increased 2.2% QoQ, while advances increased 1.6% QoQ, but these are closing-balance growth rates, not measures of repricing or new-loan contribution. ^{[3] [3]} The rise in aggregate cost of deposits from 5.13% to 5.18% indicates that deposit-cost pressure was still present, but it does not isolate the portion attributable to renewed term deposits versus the existing book. Similarly, the 15 bps rise in yield on advances cannot be decomposed into fresh-book pricing, repricing of floating-rate loans, portfolio mix or interest recognition.

Conclusion: the observable Q3 margin bridge is approximately +15 bps from higher loan yields, less 5 bps from higher deposit costs, with no disclosed basis for assigning the resulting movement between existing term-deposit repricing and fresh loan growth.

For Q3 FY25, Indian Bank reported fresh slippages of Rs 1,004 Crores: RAM accounted for Rs 996 Crores, comprising Retail Rs 140 Crores, Agriculture Rs 527 Crores, and MSME Rs 329 Crores; Corporate contributed Rs 8 Crores. ^[4]

The PCR including technical write-offs improved to 98.09% in Q3 FY25, from 95.90% in Q3 FY24—an increase of 219 basis points year on year. ^[1] The improvement indicates that coverage was maintained at a higher level despite the reported fresh slippages.

Indian Bank’s latest LDR is approximately 82.82%, based on Q2 FY27 gross advances of 7.23 lakh crore and deposits of 8.73 lakh crore as of 30 September 2026 ^[5]. This is 1.04 percentage points below the latest-available five-peer average of 83.86%, but the comparison is distorted by Bank of Maharashtra’s latest cited ratio being from Q1 FY27. On a cleaner same-Q2 basis excluding Bank of Maharashtra, Indian Bank’s LDR is 0.20 pp above the four-peer average of 82.62%.

Peer comparison

Notes: † Derived from the reported advances and deposit balances. The Indian Bank figure uses total advances and deposits, while the Q2 peer figures are largely global measures; the ranking is therefore directional rather than perfectly like-for-like. Excluding Bank of Maharashtra to keep the period at Q2 FY27, the peer average is 82.62%, derived from Canara Bank, Bank of Baroda, PNB and Union Bank.

The more important signal is direction: Indian Bank’s Q2 advances grew 16.6% YoY against deposit growth of 12.4%, implying a 4.2 pp growth gap and explaining the rise in its LDR. Management had previously emphasized keeping the credit-deposit growth gap narrow, but the latest quarter shows that credit is currently running ahead of liabilities ^[5][11].

Liquidity and funding measures

• CASA-led deposit mobilisation: Indian Bank is prioritising CASA, relationship banking, salary accounts and float balances. CASA stood at 39.28% in Q2 FY27; current-account deposits grew 27.5% YoY, while savings deposits grew 10.8% ^[5]. Management has stated an objective of taking CASA above 40% through relationship banking and salary-account acquisition ^[12]. This is the most structurally helpful lever because it raises deposits while limiting the cost of funds.
• Selective use of bulk deposits: Management is avoiding indiscriminate bulk-deposit mobilisation. Bulk deposits remained around Rs 1.61 lakh crore between March and June 2026, while the bank avoided the market when certificate-of-deposit and bulk-deposit rates were around 7.7%-8.0% ^[13]. The objective is to prevent credit growth from being funded by expensive and potentially less stable liabilities.
• Market borrowings and money-market funding: Indian Bank prefers borrowings at approximately 5.00%-5.25% when economically attractive, compared with short-duration bulk deposits that could cost 100-150 bps more ^[13]. It is also using TREPS and the call market, with borrowings repriced daily ^[14]. These sources provide incremental funding capacity without relying entirely on high-cost customer deposits, although they do not mechanically reduce the LDR, since borrowings are not part of the deposit denominator.
• FCNR(B) and ECB mobilisation: As of the July 2026 earnings call, the bank had raised around USD 150 million through FCNR(B) deposits and expected combined FCNR(B) and ECB mobilisation of USD 1.5-2.0 billion, supported by a pipeline of around USD 1 billion ^[15]. FCNR(B) increases the deposit base, while ECB funding diversifies liabilities outside the domestic deposit market.
• SLR and liquidity-buffer management: The bank has indicated that excess SLR holdings, rather than special purchases solely for liquidity purposes, support its LCR ^[16]. The latest disclosed LCR was 123% in Q1 FY27, maintained partly through borrowings and the funding mix ^[17]. This protects short-term liquidity, though it is distinct from lowering the LDR.
• Asset-side selectivity and repricing: Indian Bank is exiting or repricing thinly priced loans and shed approximately Rs 6,000 crore of highly competitive loans sequentially ^[13]. It is also selective in NBFC lending, focusing largely on AAA- and AA-rated opportunities ^[14]. This does not directly improve the LDR, but it allows the bank to allocate scarce funding to better-yielding, higher-quality credit rather than chase volume at weak spreads.

Analyst read: Indian Bank is not operating at the highest LDR in this peer set, but its Q2 ratio is already close to the same-quarter peer average and has risen because advances are outpacing deposits. The funding strategy is therefore a combination of CASA growth, disciplined bulk-deposit usage, cheaper market borrowings, FCNR(B)/ECB diversification and excess-SLR liquidity. These measures can support credit availability and protect margins, but a sustained reduction in LDR ultimately requires deposit growth to catch up with loan growth; borrowings and SLR primarily manage liquidity and funding risk rather than solve the ratio mathematically.