BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The difference between RBI lending rate and the average lending rate of a bank
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The difference in the interest rates between the fixed deposit rate and savings rate of a bank
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The difference between the deposit rates and the lending rates of a bank
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The difference in the deposit rates for the banks and the borrowing rates of RBI
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Detailed explanation-1: -For many financial institutions, the net interest margin is a primary source of income. The banks’ net interest margin can be interpreted as the cost of financial intermediation. Therefore, it is the difference between what borrowers pay for their loans and what they receive from lending.
Detailed explanation-2: -What Is NII and NIM? NII or net interest income is the difference between the income a bank earns from its lending activities and the interest it pays to depositors whereas NIM or net interest margin is calculated by dividing NII by the average earning assets.
Detailed explanation-3: -Net interest margin is similar in concept to net interest spread, but the net interest spread is the nominal average difference between the borrowing and the lending rates, without compensating for the fact that the earning assets and the borrowed funds may be different instruments and differ in volume.
Detailed explanation-4: -Net interest income or NII is the main revenue head for banks and is the difference between interest earned on advances and the interest paid to depositors/funds raised from markets. NIM is the profit margin/profitability gauge earned from advances and other credit businesses as a percentage of cost.