HDFC Bank, ICICI Bank, and Yes Bank See Reduced Loan Yields In Q4

Yield on advances, which is a critical parameter for assessing loan profitability, saw a fall in Q4 for some prominent private sector banks, Moneycontrol noted. Yes Bank reported a 10 basis points (bps) sequential fall to 9.2% in Q4FY26, compared to 10.1% in Q4FY25, marking a 90 bps year-on-year decline.

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HDFC Bank reported a 30 bps quarter-on-quarter drop in yield on advances to 7.8% in Q4FY26. The ratio has declined about 50 bps compared to the same quarter last year and is below the post-merger average of over 8%, according to Moneycontrol.

ICICI Bank reported a yield on advances of 8.87% in Q4FY26, down 21 bps from 9.08% in Q3FY26. On a year-on-year basis, the decline was nearly 100 bps. This is the lowest level since Q2FY23, when the bank reported 8.63%, as per Moneycontrol.

Loan Growth Remains Positive

Despite lower yields, credit growth remained positive across the three banks. Yes Bank reported a year-on-year loan growth of 11.1%, while other lenders reported growth in the range of 6% to 11%, according to Moneycontrol.

Contribution was notable from the retail and corporate sectors. Retail loans represented nearly 54% of total loans at HDFC Bank, ICICI Bank’s share being close to 57%, whereas at Yes Bank, it stood at 46%.

RBI Rate Cut Effect on Lending Rates

Between February 2025 and December 2025, the RBI reduced its policy rate by 125 basis points, according to RBI statistics. According to the RBI, transmission was estimated at 100 bps for deposits, while lending rates experienced transmission of 90 bps.

A large portion of loans for private banks is linked to external benchmark lending rates (EBLR), enabling faster repricing. ICICI Bank's domestic loans are mostly benchmarked at 56%, while HDFC Bank has a higher portion of floating rate loans at 70%, according to Moneycontrol.

Change in the Composition and Interest Rate of Loans

The banks have been growing steadily in their lending business across the retail and corporate sectors, with the mix of loans dictating the returns from the lending business. The reduction in yields from advances can be attributed to the changes in interest rates.

The decline in lending yields across major private banks was observed alongside steady credit growth and changes in interest rate transmission during the financial year.