Comments
The net interest margin (NIM) of many a public sector bank has shown good growth in 2010-11 with a positive impact on profitability.
The reasons behind the growth in NIM — a key parameter to judge a bank's performance — are many and varied, according to experts.
Among the banks which had declared their results, Andhra Bank, State Bank of Hyderabad (SBH) and Central Bank of India witnessed strong growth while the upward shift in NIM in other banks ranged from good to modest.
“Our growth in NIM to 3.81 per cent is a record growth. We had a very good fund movement. The savings bank (SB) growth was over 22 per cent,” Mr Anil Girotra, Executive Director, Andhra Bank, told Business Line .
For Andhra Bank, the deposits grew by 18 per cent while advances increased by 27 per cent. “There also we were making money,” Mr Girotra said.
Mr S. Sridhar, Chairman and Managing Director, Central Bank of India, has attributed the NIM growth to a “conscious” replacement of high cost deposits with low cost current accounts and savings accounts (CASA) deposits.
According to Mr Nagesh Paydah, Chairman and Managing Director, Oriental Bank of Commerce, the 64 basis point increase in his bank's NIM was led by income growth, a good drop in cost of deposits and enhanced yield on advances.
However, it would be a challenge for banks to sustain growth in NIM in the current financial year, admit bankers.
“The NIM at 3.51 per cent might come under little stress going forward. But we are confident of maintaining it at 3.25-3.50 per cent,” Ms Renu Challu, Managing Director, State Bank of Hyderabad, said.
The expected increase in the cost of deposits, as banks are likely to hike deposit rates soon following the rate hikes by the RBI, and the increase in savings bank rate by 50 basis points are among the factors that may cause strain on NIM this year.
Mr R. Ramachandran, CMD, Andhra Bank, too admitted that his bank's NIM was likely to be “hit marginally” at a press conference held last week.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.