Ambit Capital's report indicates that Indian bank margins will remain constrained in the near term, primarily due to tightening liquidity and intense competition for deposits. The report notes that since Q4FY25, margins have contracted, influenced by an easing monetary cycle. While some relief may come from liability repricing, a significant recovery is contingent on the maturation of high-cost, long-term deposits. Credit growth is anticipated to be resilient, projected at 11-13% for FY27, with secured lending segments such as gold, vehicle loans, and loans against property driving this growth. However, risks persist, particularly in unsecured lending. The report highlights a 'deposit paradox,' where household savings are increasingly diverted to capital markets, resulting in slower deposit growth and a decline in low-cost deposits. Despite these challenges, banks maintain stable fundamentals, with robust balance sheets providing short-term insulation against potential asset-quality shocks. Furthermore, the competitive landscape is expected to shift, with private sector banks likely to pursue aggressive growth strategies, potentially impacting the market share of public sector banks.