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BankingNABARD / RBI

Bank NIMs Under Pressure After December 2025 Repo Cut

6 December 20251 min read
BANKING & FINANCEBank NIMs UnderPressure AfterDecember 2025Repo Cut6 December 2025safalsetu.com

Why in the news

After the December 2025 repo cut, banks face narrower margins because loan rates reset faster than deposit rates.

About NIM

  • Net Interest Margin shows how profitably a bank earns from lending and investing against what it pays for funds.
  • Formula: (Interest Earned − Interest Expended) ÷ Average Interest-Earning Assets × 100.
TermMeaning
Interest earnedIncome from loans, advances, government securities, investments
Interest expendedCost of deposits, borrowings and other funds
Interest-earning assetsLoans, advances and investments that yield interest

Why NIMs matter

  • Signals profitability: wider gap between lending income and funding cost.
  • Reflects handling of interest rate risk and asset-liability mix.
  • Stronger NIMs usually mean higher NII and profit growth.

Test yourself

1. In which month and by how much did RBI cut the repo rate, prompting concern over bank NIMs?

The notes state a 25 bps repo cut in December 2025.

2. In the NIM formula, what is divided by average interest-earning assets?

NIM = (interest earned − interest expended) ÷ average interest-earning assets × 100.

3. Why are NIMs expected to shrink after the repo cut, according to the notes?

Slower deposit repricing and a high CD ratio squeeze margins.

This topic is part of Daily Current Affairs 5 December 2025 (13 topics).

All topics of the dayDay quizDecember 2025

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