Jefferies says RBI’s 25‑bp hike will lift margins for ICICI, SBI and Axis

Jefferies expects the RBI’s 25‑basis‑point rate hike to boost earnings margins for India’s three biggest lenders – ICICI Bank, State Bank of India (SBI) and Axis Bank. The broker says higher rates will speed up loan repricing, letting these banks charge more interest on existing credit. Faster repricing could add several percentage points to net‑interest margins over the coming quarters. Jefferies warns that smaller private banks, non‑bank finance companies (NBFCs) and life‑insurance firms could feel tighter financial conditions and see margin pressure. These entities typically rely on lower‑cost funding and may struggle to pass on rate increases to borrowers. The RBI’s calibrated tightening stance signals a move away from ultra‑low rates, aiming to contain inflation while keeping credit growth steady. Analysts note that the split impact could reshape investment flows toward the larger banks.## Context The RBI raises its policy rate to tame price rises; higher rates raise the cost of funds for lenders, which can be passed on to borrowers through loan repricing. Large banks with broad retail portfolios can often shift the higher cost to customers, widening net‑interest margins. Smaller lenders and NBFCs, which depend more on cheap deposits or market funding, find it harder to transfer the extra cost, so their profitability may be squeezed.