Bank of Maharashtra plans to protect its net interest margin (NIM) in the current financial year by driving up CASA, reducing dependence on high-cost bulk deposits, tapping infrastructure bonds and repricing loans.

Even as it takes steps to guard against NIM contraction in a year where the Reserve Bank of India (RBI) has kicked off an interest rate-cut cycle, the state-owned lender will have Rs 3,000 crore freed due to a percentage reduction in cash reserve ratio (CRR) later in the year. 

Bank of Maharashtra has managed to keep its NIM in the first quarter of this fiscal ended June at 3.95%, which is above its guidance of 3.75% for the year. The lender’s NIM has stayed almost flat compared to 3.97% a year ago but is down from 4.01% reported in the preceding March 2025 quarter. 

“We are consciously shunning the high-cost bulk deposits and looking at alternate sources of raising resources, including infrastructure bonds. Our focus is on mobilising low-cost CASA (current account savings account) deposits,” said Bank of Maharashtra managing director and CEO Nidhu Saxena in the post-earnings media conference.  

After RBI successively reduced repo rate by 100 basis points since February this year to 5.5%, banks have felt pressure on their lending margins. Analysts have said that the NIMs of banks will get impacted in the current fiscal due to a lowering of interest rates by the RBI. 

Though lenders are undertaking several initiatives to mobilise CASA to protect their lending margins, Bank of Maharashtra has an advantage as it has the highest component of this segment of deposits among all banks. CASA represents 50.07% of the bank’s total deposits as of 30 June 2025, slightly above its guidance. This has helped it to arrest margin contraction to a certain extent after the bank passed on interest rate-cut benefits to 40% of its repo-linked book. 

“The bank’s cost of deposits has actually come down by 15 bps during this period and we have been able to somewhat protect our NIMs,” said Saxena.

Bank of Maharashtra has around 2,700 branches and has created a New Business Customer Acquisition Vertical to help it onboard salary accounts, collection accounts and digital gateways for institutional clients.

Besides increasingly tapping CASA deposits, the Pune-headquartered bank will get support of Rs 3,000 crore from a 100-bps reduction in CRR to protect its NIM during the fiscal. The lender has Rs 12,000 crore of funds blocked for meeting the CRR requirement at 4%.

The RBI had, in its June monetary policy, announced a cut in the CRR from 4% to 3%, which is to be rolled out in four equal tranches of 25 bps each, from the fortnight beginning 6 September to 29 November.

Bank of Maharashtra also plans to reprice a part of its loan portfolio during the course of the next two quarters. The lender has 55% of its portfolio linked to the marginal cost of funds-based lending rate (MCLR).

Though Saxena has guided to a NIM of 3.75% for FY26, the lender may end up doing better than this despite the challenges. A similar conservative guidance was given for FY25, but the bank closed the year with NIM at 4%.

On loan growth, Saxena said the bank is looking at opportunities in infrastructure, renewable energy, data centres and co-lending.

For the fiscal first quarter ended June, Bank of Maharashtra reported a 23% year-on-year rise in net profit to Rs 1,593 crore amid decline in bad loans and improvement in interest income.

The bank’s gross non-performing assets (NPAs) declined to 1.74% as of 30 June from 1.85% a year ago, while net NPA fell to 0.18% from 0.20%. Interest income grew to Rs 7,054 crore from Rs 5,875 crore.