Indian banks expected to cut dividends for FY26 amid profitability pressure

Core Insights - The total dividend of 12 large Indian banks is projected to decline by approximately 4.2% to $5.98 billion in the current fiscal year from $6.24 billion last year, which had seen a 15.3% increase over FY24 [1][8] - All major Indian banks are expected to either cut their dividend per share or maintain it at the same level as the previous fiscal year [1][8] Dividend Projections - HDFC Bank is expected to reduce its dividend to ₹8.25 per share from ₹11 per share in the previous year [2][8] - Bank of Baroda may lower its dividend to ₹7.9 per share from ₹8.35 per share [8] - State Bank of India (SBI) is projected to maintain its dividend at ₹16 per share, nearly unchanged from ₹15.90 per share last fiscal [4][8] - ICICI Bank could be the only large bank to increase its dividend to ₹12 per share from ₹11 a year ago [8] Economic Factors - The Reserve Bank of India's 100 basis point repo rate cut in 2025 has compressed bank margins, as loan rates have decreased while competition for deposit funds has increased funding costs [6][8] - Weaker credit growth, now at 10% year on year compared to 13.6% last year, is attributed to subdued demand and a cautious economic environment [7][8] - Trade uncertainties, particularly the US-imposed 50% tariff on Indian goods, have negatively impacted expectations [7][8]