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Banks net interest income soars by a record 25.5pc in Q3

February 20, 2023

Banks net interest income soars by a record 25.5pc in Q3
Net interest income of banks grew by a record 25.5 per cent to Rs 1.78 lakh crore in the December 2022 quarter on-year, driven by a healthy credit off-take and higher yield on advances, according to an analysis.

The quarter saw banks booking higher yields on advances as the system-wide core profitability metric net interest margin (NIM) rose by 17 basis points (bps) to 3.28 per cent. This was possible as banks repriced existing loans higher at a faster rate and also increased the new loan pricing, but kept deposit rates almost unchanged, according to an analysis by Care Ratings’ senior director Sanjay Agarwal.

But the rise in NIM was led by private sector banks, thanks to their operational efficiencies, at 4.03 per cent, up 15 bps on-year. State-owned banks registered NIM at 2.85 per cent, up 17 bps on-year.

Net interest income or NII is the main revenue head for banks and is the difference between interest earned on advances and the interest paid to depositors/funds raised from markets. NIM is the profit margin/profitability gauge earned from advances and other credit businesses as a percentage of cost.

Agarwal expects the NIM to stabilise going forward due to repricing of liabilities of late major banks have begun to offer higher returns to depositors as credit demand continues to remain in high double-digits while deposits are hardly coming in.

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