Net interest margin

Net interest income as a percentage of average interest-earning assets. The central profitability measure for a lender.

A bank with ₹1,750 crore of net interest income on ₹48,000 crore of average earning assets runs a margin of 3.65%. Indian banks typically operate in the range of 3% to 4.5%, with the strongest deposit franchises at the top.

Three things set the margin: what the bank earns on its loans, what it pays for its funding, and the mix between them. A bank whose margin is rising because it has shifted into unsecured lending has bought that margin with credit risk that will appear two years later.

Margin propped up by aggressive or unseasoned loan growth is the classic setup. Provisioning arrives after the growth stops.

Read margin and loan growth together. On its own, neither tells you much.

What you earn and what you pay are two of the levers. The mix is the third.