Net interest income of banks increased by 25 percent in the third quarter

Mumbai: In the quarter ended December 2022, the net interest income of banks increased by a record 25.5 percent to Rs. 1.78 lakh crores. This indicates better credit withdrawal conditions and higher yields on loans. An analysis revealed this fact.

Banks earned more on loans during the quarter. The net interest margin of banks increased by 0.17 percent to 3.28 percent in this quarter.

Banks revalued existing loans at higher rates and hiked interest rates on new loans, Care Ratings said. On the other hand, it has not changed the deposit rate.

However, the increase in net interest margin was led by private sector banks. Their net interest margin increased by 0.15 percent year-on-year to 4.03 percent. At the same time, the net interest margin of public sector banks increased by 0.17 percentage points to 2.85 percent.

Net interest income is the main source of income for banks. It is the difference between interest earned by banks and interest paid on deposits. Aggarwal believes that the repricing of liabilities will stabilize the net interest margin going forward.

Loan demand has remained in the high double digits, so now some leading banks have started offering higher returns to depositors. The Reserve Bank of India has increased the key policy rate repo by 2.50 percent since May last year. Inflation remains above the Reserve Bank's comfort level of four percent (up or down two percent).