INTEREST IN %

12 BULK DEPOSITS
11

10
FIXED DEPOSITS
9

8
Average Cost of Funds 7 RECURRING DEPOSITS
6

4 SAVINGS ACCOUNT DEPOSITS

The numbers on the vertical 3
lines show the rates of
2
interest CURRENT ACCOUNT DEPOSITS
1

DEPOSITS

COST OF FUNDS

LIABILITIES
 INTEREST IN %
18
PERSONAL LOANS
17
16
15

14
13
CORPORATE LOANS

12 MORTGAGE LOANS
11
Average yield HOUSE LOANS
10
9
8
7
6
All the figures are
5 approximate and taken
4 for the purpose of
3 explanation
2
1

LOANS AND ADVANCES

YIELD/INCOME
ASSETS
 CASE – 1 18

17
VIABLE BANKING 16
Note OPERATIONS 15

The given 14

figures are only 13 AVERAGE YIELD ON

12 ADVANCES 9.8%
approximations 12
11
11
10 10
9 9
AVERAGE COST OF
8 8 NET INTEREST
FUNDS 6.8%
7 7 MARGIN (NIM)
6 6 3%
5 5
4 4
3 3
The numbers on the vertical All the figures are approximate
2 2
lines show the rates of and taken for the purpose of
interest 1 1 explanation

INTEREST ON DEPOSITS INTEREST ON LOANS

(in %) AND ADVANCES (in %)
COST OF FUNDS YIELD/INCOME
 18

CASE – 2 17
16
Note STRAINED BANKING 15

The given OPERATIONS 14

13 AVERAGE YIELD ON
figures are only ADVANCES 9.8%
12 12
approximations 11 11

10 10
9 9
AVERAGE COST OF 8
NET INTEREST
8
FUNDS 7.3% MARGIN (NIM)
7 7
2.5%
6 6
5 5
4 4
3 3
The numbers on the vertical All the figures are
lines show the rates of 2 2 approximate and taken for the
interest 1 1 purpose of explanation

INTEREST ON DEPOSITS INTEREST ON LOANS

(in %) AND ADVANCES (in %)
COST OF FUNDS YIELD/INCOME
WE HAVE SO FAR LEARNT THAT…

 Net Interest Margin (NIM) is the important parameter

for the survival of any banking system.

 At present, some new generation private sector banks

along with SBI are able to achieve +3% NIM, which is the

benchmark for profitable banking operations.

 But most of the public sector banks are struggling with

NIMs of 2.2 to 2.7%. Hence these banks are not able to

achieve desired levels of profitability.

 HENCE, THE CORE OF THE BANKING OPERATIONS LIES IN

KEEPING COST OF FUNDS AS MINIMUM AS POSSIBLE

SO AS TO KEEP HIGH NET INTEREST MARGINS

CHALLENGES FOR PUBLIC SECTOR BANKS (BARRING SBI)

 Unable to attract current account deposits
 Not matching with technological upgradation of private sector banks
 Bureaucratic apathy
 High Non Performing Assets (NPAs)
 Lagging in personalised service
 Emphasis by Govt. for opening zero balance accounts like BSBDA, PMJDY etc.

IN VIEW OF THE ABOVE, MOST OF THE NEW GENERATION PVT. SECTOR BANKS ARE
INCHING AHEAD IN PROFITABILITY AND EFFICIENCY IN OPERATIONS