NIM And Profitability: A Risk Assessment On Indian Banks

Dr. Rajendra Kumar Sinha, Sourodeep Pathak, Arnab Bhattacharyya, Shubhajit Chakraborty and Dr. Siddharth Misra

Purpose: This paper shows the effect of efficient management of interest rate volatility in terms of NIM and its effect on the profitability of the Indian banks. Design/ Methodology/ Approach: The secondary data used in this study were collected from the official annual reports of the ten banks selected on the basis of their asset size. Graphs have been made on the basis of the net profit and NIM of these banks and a performance metric has been developed to understand the extent of impact of NIM rates on the banks’ profitability. Findings: Banks with higher NIM have shown consistent growth in terms of profitability and efficiency, whereas, banks with lower margins have shown a drop in their profitability and have been affected due to provisioning of non-performing assets (NPA). Practical Implications: This study will encourage Indian banks in improving their management of interest rate risk and enable them to strive for higher rates of NIM. Originality/ Value: This paper focuses solely on the aspect of NIM and how it affects a bank’s profitability. A study of this nature has not been attempted in context of Indian banks and this study attempts to emphasize on the importance of interest rate risk management in order to achieve higher profitability levels.

Volume 11 | 04-Special Issue

Pages: 190-201