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    HomeNewsBusinessPersonal FinanceWhat is Net Interest Margin?

    What is Net Interest Margin?

    Net Interest Margin is mainly used for analyzing bank stocks. It is calculated by dividing the net interest income to loans and advances given by banks to borrowers. Net interest income is the difference between interest earned on loans and interest expended on deposits.

    September 08, 2014 / 16:08 IST

    Net Interest Margin is mainly used for analyzing bank stocks. It is calculated by dividing the net interest income to loans and advances given by banks to borrowers. Net interest income is the difference between interest earned on loans and interest expended on deposits.

    Formula

    Net Interest Income = Interest earned  - Interest expendedNIM = Net Interest Income / Average loan book

    ExampleInterest earned: Rs 500 cr, Interest expended: Rs 200 cr. Net Interest Income: Rs 300 cr.Loan book at beginning of the year: Rs  10000Loan book at end of the year: Rs  10500NIM = [300/(10000+10500/2)] = 2.93%.

    first published: Sep 8, 2014 04:08 pm

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