The Q2 FY27 banking results have exposed a growing divide between public sector banks and their private peers. Public sector banks are reporting stronger net interest margin momentum, while large private lenders are absorbing the cost of raising deposits to sustain credit growth.
The gap is not simply about which banks are earning more from loans. It reflects a shift in funding economics, with foreign currency deposits temporarily weighing on private lenders’ profitability. The bigger question is whether this marks a lasting change in competitive strength or a temporary distortion in an otherwise healthy banking cycle.
