Analysts have reduced earnings growth forecasts and target prices for banking stocks for FY27, primarily due to concerns over net interest margins (NIMs). The ET Banks index has declined nearly 6% in 2026, reflecting broader market weakness, as the BSE Sensex fell 10%. Despite a slight improvement in deposit growth to 12.7% in December 2025, it lagged behind a 14.5% surge in credit growth. Only four out of 29 banks reported a year-on-year improvement in NIMs, down from ten banks in the previous year. Analysts from JM Financial Institutional Securities noted an increasing reliance on higher-cost funding, which is pressuring NIMs, prompting broad-based earnings cuts across banks for FY27-28. Motilal Oswal Financial Services has also slightly reduced its annualized earnings growth estimate to 16.1% from 16.5% for banks under its coverage, citing ongoing challenges in attracting low-cost deposits. As competition for deposits intensifies, banks are expected to face persistent challenges in mobilizing low-cost funding.