The public sector bank, Corporation Bank has planned to achieve 2.60 percent net interest margin (NIM) for the quarter ending December, 2012. The bank is hopeful of achieving this target given the reduction in deposit interest rates and growth in retail deposits segment.
On the matter, the Chairman and managing Director of Corporation Bank, Mr. Ajay Kumar said that at present the bank has a low net interest margin, a component which is considered to be important for improving a bank's profitability. He further added that the bank is witnessing a steady rise in its NIM and expects it to reach 2.50 percent to 2.60 percent by the end of the current quarter.
Net interest margin is the excess of a bank's earnings from interest and fees over its expenditure under the same heads.
It is reported that the bank's NIM declined in the June quarter and stood at 2.29 percent from 2.75 percent that it recorded for the same period last year. An increase in the bank's cost of funds was said to be the reason for this decline. On this, Mr. Kumar said that the bank's costs of funds are decreasing because of the decline in the deposit rates and because of a reduction in bulk deposits (as per the directives of the finance ministry).