SIGNIFICANT PARAMATERS TO SHOW HOW STRONG A BANK IS
SIGNIFICANT PARAMATERS TO SHOW HOW STRONG A BANK IS
SIGNIFICANT PARAMATERS TO SHOW HOW STRONG A BANK IS Net Interest Income There is no such thing as turnover or sales for banks. Instead, net interest margin is an indicator of bank’s performance; it is the difference between the income earned on lending and interest spent on deposit. Better performing banks have Net Interest Margin (NIM) in the range of 4% and above while average banks have NIM of 2 or 2.5% Non-interest Income Income earned on treasury operations is significant portion on non-interest income. It is the bank’s income mainly from service such as processing fees or penalty charges. Also it includes sale of assets sales, commission earned on sale of third party products like insurance, pension schemes, and mutual funds. Non-performing Assets Non performing assets (NPA) are loans where borrower payments have remained overdue for a period for over 90 days. Banks are required to classify NPAs further into substandard — when the loan is over due for 90 days; doubtful asset — when the loan is over due for 12 months; and loss asset — loans that are considered uncollectible. Provisions It is slice of income that banks have to set aside to cover potential losses on loans. The longer the overdues, the higher is the provisions that banks have to make on loans. However, if the borrower provides security against the loan, provisions are lowered. CASA CASA stands for current account and savings account deposits. Banks do not pay any interest on current account and as low as 4% on savings account. The higher share of