Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

<ul>
<li>RBI's MPC cut 25bp as expected, but it remains behind the curve, with the real policy rate now excessively high at +5%. RBI inflation forecasts were and remain too high. </li>
<li>Food deflation is likely to be shortlived, with vegetable prices rising MoM since May'25. But all other food and non-food inflation components are moderating, and GST cuts impart further disinflation. </li>
<li>We expect inflation to be 1.8%YoY in Q4FY26 (vs RBI's 2.9%YoY forecast), 2.3% and 2.5% in Q1 and Q2FY27, so expect another 75bp reduction in repo rate by Aug'26. </li>
</ul>


RBI's MPC cut 25bp as expected, but it remains behind the curve, with the real policy rate now excessively high at +5%. RBI inflation forecasts were and remain too high. 
Food deflation is likely to be shortlived, with vegetable prices rising MoM since May'25. But all other food and non-food inflation components are moderating, and GST cuts impart further disinflation. 
We expect inflation to be 1.8%YoY in Q4FY26 (vs RBI's 2.9%YoY forecast), 2.3% and 2.5% in Q1 and Q2FY27, so expect another 75bp reduction in repo rate by Aug'26. 


India: RBI Cuts 25bp but the Real Policy Rate Is Still Too High at +5%

India Equity Analyst - Fundamental & Thematic, Beat the Street

Sudarshan Bhandari

India Equity Analyst - Fundamental & Thematic

Beat the Street

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Thematic (Sector/Industry)

<ul>
<li>The Indian government is actively considering a new wave of PSB consolidation, headlined by a potential merger of Union Bank of India and Bank of India, alongside selective privatisation.</li>
<li>This signals a strategic shift from post-NPA crisis management to building globally competitive banks, which could fundamentally alter the sector's competitive landscape and credit capacity.</li>
<li>With PSBs on their strongest footing in a decade, this consolidation round has a higher chance of success, forcing investors to re-evaluate the long-term structure of Indian banking.</li>
</ul>


The Indian government is actively considering a new wave of PSB consolidation, headlined by a potential merger of Union Bank of India and Bank of India, alongside selective privatisation.
This signals a strategic shift from post-NPA crisis management to building globally competitive banks, which could fundamentally alter the sector's competitive landscape and credit capacity.
With PSBs on their strongest footing in a decade, this consolidation round has a higher chance of success, forcing investors to re-evaluate the long-term structure of Indian banking.


Thematic Report on PSB Consolidation 2.0: UBI-BoI Merger Signals India's Push for Global-Scale Banks

Market & Forensics Analyst, Beat the Street

Nimish Maheshwari

Market & Forensics Analyst

<ul>
<li>The 100bp rate cut cycle is transmitting unevenly, with Private Banks raising loan spreads to 415bp while PSBs cut more sharply, compressing margins. </li>
<li>This divergence is reshaping profitability, with NIMs under pressure through Q2–Q3 FY26 and relief delayed by slow deposit rate repricing.</li>
<li>Margin recovery now hinges on H2FY26 onwards, aided by CRR liquidity, easing funding costs, and credit cost normalization.</li>
</ul>


The 100bp rate cut cycle is transmitting unevenly, with Private Banks raising loan spreads to 415bp while PSBs cut more sharply, compressing margins. 
This divergence is reshaping profitability, with NIMs under pressure through Q2–Q3 FY26 and relief delayed by slow deposit rate repricing.
Margin recovery now hinges on H2FY26 onwards, aided by CRR liquidity, easing funding costs, and credit cost normalization.


Bank Margins Under Pressure: Navigating the Rate Cut Ripple

<ul>
<li>RBI finalized new provisioning norms for project finance (effective October 1, 2025), significantly softening earlier proposals. Provisioning for under-construction projects has been cut to 1–1.25% (from the proposed 5%).</li>
<li>The change reduces capital strain for lenders, preserves profitability metrics, and encourages fresh credit flow to infrastructure and commercial real estate (CRE) sectors.</li>
<li>Lenders must maintain or improve RoA/RoE while passing on marginal provisioning costs to borrowers. The credit environment for real estate and infrastructure segments could strengthen materially in FY26 and beyond</li>
</ul>


RBI finalized new provisioning norms for project finance (effective October 1, 2025), significantly softening earlier proposals. Provisioning for under-construction projects has been cut to 1–1.25% (from the proposed 5%).
The change reduces capital strain for lenders, preserves profitability metrics, and encourages fresh credit flow to infrastructure and commercial real estate (CRE) sectors.
Lenders must maintain or improve RoA/RoE while passing on marginal provisioning costs to borrowers. The credit environment for real estate and infrastructure segments could strengthen materially in FY26 and beyond


RBI’s Relief Push: How Easier Infra & Realty Credit Norms Could Impact Banks & NBFCs

<ul>
<li>The banking sector will likely see earnings growth bottom out in FY26, with the second half potentially performing better than the first half as deposit rate reductions eventually flow through.</li>
<li>This divergence between declining lending rates and sticky deposit costs is the core driver of NIM compression.</li>
<li>This monetary easing is expected to exert downward pressure on banks' lending yields, impacting NIMs, particularly in the first half of fiscal year 2026 (1HFY26). </li>
</ul>


The banking sector will likely see earnings growth bottom out in FY26, with the second half potentially performing better than the first half as deposit rate reductions eventually flow through.
This divergence between declining lending rates and sticky deposit costs is the core driver of NIM compression.
This monetary easing is expected to exert downward pressure on banks' lending yields, impacting NIMs, particularly in the first half of fiscal year 2026 (1HFY26). 


Impact of Rate Cut on Indian Banking Sector: NIMs & Earnings to Contract Further Amid Slowdown

India

State Bank of India (SBI) is a multinational public sector bank and financial services company that offers a wide array of banking and financial services, including retail and corporate banking, investment banking, insurance, and wealth management. Its key products and services include home loans, SME loans, corporate credit, and digital banking solutions. The bank is headquartered in Mumbai, Maharashtra, India, and traces its roots to the Bank of Calcutta established in 1806, officially becoming State Bank of India in 1955.

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State Bank of India (SBIN IN)

India: RBI Cuts 25bp but the Real Policy Rate Is Still Too High at +5%

RBI cut rates 25bp but remains behind the curve, as its inflation forecasts were and remain too high. We expect another 75bp of rate cuts by...

Prasenjit K. Basu

Thematic Report on PSB Consolidation 2.0: UBI-BoI Merger Signals India's Push for Global-Scale Banks

Indian government mulls PSB consolidation with potential Union Bank of India and Bank of India merger, signaling shift to building globally...

Sudarshan Bhandari

Bank Margins Under Pressure: Navigating the Rate Cut Ripple

Private Banks raise loan spreads while PSBs cut more, reshaping profitability and compressing margins, with margin recovery expected in H2FY26.

Nimish Maheshwari

RBI’s Relief Push: How Easier Infra & Realty Credit Norms Could Impact Banks & NBFCs

RBI eases project finance provisioning norms, boosting credit flow to infrastructure and real estate sectors while reducing capital strain for...

Sudarshan Bhandari

Impact of Rate Cut on Indian Banking Sector: NIMs & Earnings to Contract Further Amid Slowdown

Banking sector earnings growth expected to improve in FY26 as deposit rate reductions flow through, but NIM compression likely due to declining...

Nimish Maheshwari

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

India: RBI Cuts 25bp but the Real Policy Rate Is Still Too High at +5%

​RBI cut rates 25bp but remains behind the curve, as its inflation forecasts were and remain too high. We expect another 75bp of rate cuts by...

Prasenjit K. Basu

Thematic Report on PSB Consolidation 2.0: UBI-BoI Merger Signals India's Push for Global-Scale Banks

​Indian government mulls PSB consolidation with potential Union Bank of India and Bank of India merger, signaling shift to building globally...

Sudarshan Bhandari

Bank Margins Under Pressure: Navigating the Rate Cut Ripple

​Private Banks raise loan spreads while PSBs cut more, reshaping profitability and compressing margins, with margin recovery expected in H2FY26.

Nimish Maheshwari

RBI’s Relief Push: How Easier Infra & Realty Credit Norms Could Impact Banks & NBFCs

​RBI eases project finance provisioning norms, boosting credit flow to infrastructure and real estate sectors while reducing capital strain for...

Sudarshan Bhandari

Impact of Rate Cut on Indian Banking Sector: NIMs & Earnings to Contract Further Amid Slowdown

​Banking sector earnings growth expected to improve in FY26 as deposit rate reductions flow through, but NIM compression likely due to declining...

Nimish Maheshwari

RBI cut rates 25bp but remains behind the curve, as its inflation forecasts were and remain too high. We expect another 75bp of rate cuts by...

Indian government mulls PSB consolidation with potential Union Bank of India and Bank of India merger, signaling shift to building globally...

Private Banks raise loan spreads while PSBs cut more, reshaping profitability and compressing margins, with margin recovery expected in H2FY26.

RBI eases project finance provisioning norms, boosting credit flow to infrastructure and real estate sectors while reducing capital strain for...

Banking sector earnings growth expected to improve in FY26 as deposit rate reductions flow through, but NIM compression likely due to declining...