Stocks of India’s largest private lender HDFC Bank, along with those of Axis Bank, fell nearly 5% on Monday as concerns mounted over their weak net interest margins.

HDFC’s NIM contracted 13 basis points sequentially to 3.4% from 3.53% in the last quarter. Axis Bank’s NIMs compressed 16 basis points from a quarter ago to 3.46% in April-June.

“NIM compression, with softer fees” added to “earnings headwinds,” Citigroup said in a report on Sunday, adding that NIMs will remain a “key monitorable” going ahead.

Shares of HDFC Bank have been under pressure since March, after Atanu Chakraborty, its part‑time chairman, resigned, flagging governance and ethical concerns within the institution.

In June, the bank said an independent legal review found no evidence to substantiate concerns raised in Chakraborty’s resignation letter.

The global brokerage also noted that loan momentum has improved from the Mumbai-based lender, mostly led by demand from the commercial and corporate sector.

“Retail [loan] traction remained underwhelming,” the report said.

Meanwhile, the sharp compression of Axis Bank’s NIMs was mostly due to the impact of loan repricing, Indian brokerage Motilal Oswal said in a report on Monday.

Axis also showed improvement in loan growth driven by corporate sector demand, while the retail segment remained muted, it added.

The brokerage has cut earnings estimates for Axis Bank for both the current financial year ending March 2027 and the next by 2%.