Axis Bank is looking to strengthen its margins by adjusting its lending and product mix after foreign currency non-resident (FCNR-B) deposits created an 11-basis-point drag on net interest margins (NIMs) during the September quarter.
The lender expects asset-side changes and cost-of-funds management to help improve margins over time.
Speaking to NDTV Profit, management said the bank was evaluating several ways to improve profitability while retaining flexibility over how and when it deploys FCNR-B funds.
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The strategy comes alongside a strong quarterly earnings performance, supported by higher net interest income and lower credit costs.
Axis Bank's consolidated net profit rose 37.6% year-on-year to Rs 7,003 crore in Q2 FY27, compared with Rs 5,090 crore in the year-ago period.
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Net interest income increased 12% to Rs 15,371 crore from Rs 13,745 crore, while operating profit advanced 6.4% to Rs 11,083 crore from Rs 10,413 crore.
Fee income provided additional support, growing 6% year-on-year. Management also pointed to stronger retail disbursements as a driver of loan growth, while wholesale banking activity remained firm.
Deposit mobilisation was robust, supported by current account and savings account (CASA) balances and FCNR-B inflows.
The bank also reported an improvement in asset quality. Gross non-performing assets declined to 1.16% from 1.28% in the June quarter, while net NPAs eased to 0.35% from 0.39%. Provisions stood at Rs 1,694 crore, down from Rs 2,223 crore sequentially and Rs 3,547 crore a year earlier.
Credit costs fell 18 basis points quarter-on-quarter to 0.45%, and the cost-to-assets ratio improved by six basis points. Gross slippages were also down 63 basis points year-on-year.
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Looking ahead, management said changes in asset and product mix could support NIM improvement, alongside multiple levers on funding costs.
The bank does not expect a material impact from the transition to the expected credit loss (ECL) framework and said it remains positioned to deliver profitable growth.
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