Another contributer to higher slippages was the agriculture book, particularly because of one state, which had declared a loan waiver, leading to fresh bad loans, he added.
Thus, NIM is a significant indicator of financial stability of a lender. Kumar said that one large account slipped in the quarter because a member bank of a particular consortium could not implement the resolution plan under the terms of the 12 February circular of the Reserve Bank of India, which meant that all banks had to classify it as an NPA.
For example, if a bank had earned an interest income of Rs 8, crore and paid Rs 6, crore on its deposits on an average loan asset of Rs 64, crore, the NIM for the year will be 0.
On the slowdown in the auto sector and reports of tightening lending norms for auto dealers, Kumar said SBI is very supportive of the sector and is not panicking. Read More Definition of 'Nim' Definition: Net interest margin or NIM denotes the difference between the interest income earned and the interest paid by a bank or financial institution relative to its interest-earning assets like cash.
Every morning I pray to God," said Kumar. A negative NIM indicates that the lender has been unable to make good use of its assets, as returns produced by investments has failed to offset interest expenses.
Its capital adequacy ratio under Basel III guidelines rose 6 basis points y-o-y to In case the demand for savings increases relative to the demand for loans, the NIM will fall.