Over the next year India’s repo and reverse repo rates to be hiked by 125 bp each. Most banks will see an increase in margins in a rising rate environment.
However, the impact of the rate rise on margins will likely vary based on the banks’ CASA ratio, bulk deposits, share of borrowing, and ability to pass on
cost increases.
Based on wider framework - BOB, HDFC Bank, PNB and IndusInd Bank (INBK) are the best placeed. INBK and Shriram Transport Finance (Buy) are the only two bulk borrowers we like, given their ability to pass on the rise in cost of funds.
