Banks’ net interest margin (NIM), a key profitability gauge, grew by 46 basis points to 3.3 per cent in the January-March quarter, driven by slower deposit rate resetting, an analysis shows. This has helped lenders register a 29.5 per cent increase in their net interest income (NII) during the period, according to an analysis of the banks’ balance sheets by Care Ratings. 

NII, which is the money that banks earn from lending and paying to depositors, rose to Rs 1.83 lakh crore in Q4FY23 due to healthy loan growth and a higher yield on advances as against the year-ago period, it has said. 

The NIM saw an on-year improvement of 46 basis points (bps) to 3.3 per cent in the fourth quarter due to the faster repricing of loans, while deposit rates have not yet reflected the increased interest rates. 

The anticipated rise in deposit rates, which is expected to be a lag effect, is likely to be counterbalanced by the withdrawal of the Rs 2,000 banknotes in May this year, it added. 

The NIM of private sector lenders stood at 4.03 per cent, which was more than 43 bps, and that of public sector lenders at 2.85 per cent, up 46 bps.