What is Net Interest Margin (NIM)?

Why in News ? DBI Bank Ltd. has announced its financial results for the first quarter ended June 30, showing:

• Net profit rose by 17% year-on-year to Rs 2,007 crore.
• However, the Net Interest Income (NII) fell from Rs 3,233 crore (last year) to Rs 3,166 crore.
• The Net Interest Margin (NIM) declined from 4.18% to 3.68%.

This performance reflects the bank’s rising profitability despite pressure on core lending margins, a trend relevant for financial markets and the banking sector.

What is Net Interest Margin (NIM)?

Net Interest Margin (NIM) is a key profitability indicator for banks and NBFCs.
It shows how effectively a bank is earning from its core business of lending compared to its cost of funds (deposits or borrowings).

Simplified Meaning:

• Interest Earned → From loans, bonds, etc.
• Interest Paid → On savings, fixed deposits, etc.
• Interest-Earning Assets → Loans, investments, etc.

What is Net Interest Income (NII)?

• Net Interest Income (NII) is the difference between the interest a bank earns on its loans and investments (assets) and the interest it pays on deposits and borrowings (liabilities).