Indian banks’ return on assets (RoA) is likely to slip to 1.15%-1.2% this fiscal from about 1.3% last fiscal, with Crisil citing lower treasury income and pre-emptive provisioning ahead of the expected credit loss framework as the key reasons.Crisil said the decline in RoA should still leave the sector well above its 20-year average of 0.8% and 10-year average of 0.6%. The rating agency also said net interest margins are expected to remain stable at about 2.9% for the full year, even though they may soften from last fiscal’s exit level.The first pressure point is treasury income, which Crisil said is likely to soften by 5-10 basis points this fiscal from 1.2% last year as bond yields rise and gains from investment portfolios normalise. Last year’s treasury income benefited from a sharp fall in bond yields in the first half, which lifted mark-to-market gains.The second factor is higher provisioning, with Crisil expecting banking sector provisions to rise 5-10 basis points, though they should remain benign at below 0.5%. The increase is not being driven by asset-quality stress, but by banks making pre-emptive provisions ahead of the ECL regime that kicks in from April 1, 2027.Crisil said deposit costs may edge higher because credit growth continues to outpace deposit growth, keeping competition for deposits intense. The agency also flagged increased reliance on costlier funding sources such as bulk deposits, even as lending and deposit rates have already repriced after the repo rate cuts last fiscal.Fee income should continue to grow with credit growth, and credit costs are expected to stay contained, even with some pressure from West Asia-related disruptions for MSME borrowers. Crisil said government support measures such as ECLGS 5.0 should help limit any impact on bank credit costs.Also read: Up to 531% returns: 23 small & midcap multibaggers you might have missed in 2026“As credit growth continues to outpace deposit growth, competition for deposits remains intense. This, coupled with increasing reliance on pricier funding sources such as bulk deposits, would likely push deposit costs up,” Subha Sri Narayanan, Director, Crisil Ratings, said. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)