The situation
Annual interest income is ₹180 crore, interest expense ₹115 crore and average earning assets ₹2,000 crore. Funding costs then rise ₹15 crore with other inputs fixed.
Your task
How much does net interest margin change?
Reveal step-by-step solution
Set up the problem
Initial NII = ₹180 − ₹115 = ₹65 crore. NIM = 65 ÷ 2,000 = 3.25%.
Work through the numbers
New NII = ₹180 − ₹130 = ₹50 crore. NIM = 2.50%.
Interpret the result
Margin declines by 75 basis points. Check when asset yields can reprice and whether funding mix changes.
What to remember
Divide period net interest income by matched average earning assets. Keep credit cost separate.