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How To Evaluate The Bank’s Performance Through Ratio Analysis? ▪️Capital To Risk Weighted Assets Ratio : Above 9% ▪️Credit -Deposit Ratio : 65-70% ▪️Gross Non Performing Assets Ratio : 3-5% ▪️Liquidity Coverage Ratio (Short term liquidity management upto 30 days) & Net Stable Funding Ratio (liquidity management upto one year) ▪️Investment To Deposit Ratio : 25-30% ▪️Current Account Saving Bank Account Ratio : 45-60% ▪️Cost To Income Ratio : Cost-to-income ratio compares the bank's operating expenses to its operating income. The cost-to-income ratio quickly illustrates how effectively a bank converts revenue to profit. A lower ratio means that the bank is spending less to generate more revenue, which is a sign of efficiency. ▪️Return On Assets Ratio : ROA ratio measures how well the bank is using its assets to generate profits. It is calculated by dividing the net income by the average total assets. A higher ratio means that the bank is earning more from its assets, which is a sign of efficiency. ▪️Return On Equity Ratio : ROE ratio measures how well the bank is rewarding its shareholders. It is calculated by dividing the net income by the average shareholders' equity. A higher ratio means that the bank is generating more profits for its owners, which is a sign of efficiency. ▪️Non-Interest Income Ratio And Efficiency Ratio : The non-interest income ratio measures how much of the bank's income comes from sources other than interest, such as fees, commissions, or trading. It is calculated by dividing the non-interest income by the total operating income. A higher ratio means that the bank is diversifying its income streams, which is a sign of efficiency. Efficiency Ratio : Banks monitor their ability to generate non-interest income vs non-interest expense. The most popular ratio is used non-interest expense divided by the sum of net interest income and non-interest income. ▪️Provisioning Coverage Ratio : Above 70% PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster. ▪️Leverage Ratio (LR) : LR requires a bank’s tier-I capital to be at least 3.5% of its total exposure [ 4% For Domestic-Systemic Important Banks], which includes its equity, debt, derivative exposure & off balance sheet liabilities. Thanks for reading…

Ratio Analysis is a quantitative method used in order to evaluate the profitability, solvency, liquidity, and operational efficiency of a company. Key insights can then be gained by comparing this metric to other company metrics, previous company metrics, and/or industry benchmarks. While the 5 main types of ratios analyzed are typically liquidity, solvency, profitability, efficiency, and valuation, the list below goes over a more comprehensive list of ratios. Check it out! #creditrisk #datascience #machinelearning #dataanalytics #artificialintelligence

How To Evaluate The Bank’s Performance Through Ratio Analysis? 🔺Capital To Risk Weighted Assets Ratio : Above 9% 🔺Credit -Deposit Ratio : 65-70% 🔺Gross Non Performing Assets Ratio : 3-5% 🔺Liquidity Coverage Ratio (Short term liquidity management upto 30 days) & Net Stable Funding Ratio (liquidity management upto one year) 🔺Investment To Deposit Ratio : 25-30% 🔺Current Account Saving Bank Account Ratio : 45-55% 🔺Cost To Income Ratio : Cost-to-income ratio compares the bank's operating expenses to its operating income. The cost-to-income ratio quickly illustrates how effectively a bank converts revenue to profit. A lower ratio means that the bank is spending less to generate more revenue, which is a sign of efficiency. 🔺Return On Assets Ratio : ROA ratio measures how well the bank is using its assets to generate profits. It is calculated by dividing the net income by the average total assets. A higher ratio means that the bank is earning more from its assets, which is a sign of efficiency. 🔺Return On Equity Ratio : ROE ratio measures how well the bank is rewarding its shareholders. It is calculated by dividing the net income by the average shareholders' equity. A higher ratio means that the bank is generating more profits for its owners, which is a sign of efficiency. 🔺Non-Interest Income To Total Operating Income Ratio : The non-interest income ratio measures how much of the bank's income comes from sources other than interest, such as fees, commissions, or trading. It is calculated by dividing the non-interest income by the total operating income. A higher ratio means that the bank is diversifying its income streams, which is a sign of efficiency. 🔺Efficiency Ratio : Banks monitor their ability to generate non-interest income vs non-interest expense. The most popular ratio is used non-interest expense divided by the sum of net interest income and non-interest income. 🔺Provisioning Coverage Ratio : Above 70% PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster. 🔺Leverage Ratio (LR) : LR requires a bank’s tier-I capital to be at least 3.5% of its total exposure [ 4% For Domestic-Systemic Important Banks], which includes its equity, debt, derivative exposure & off balance sheet liabilities. Thanks for reading…

Evaluating The Bank’s Performance Through Ratio Analysis 🔺Capital To Risk Weighted Assets Ratio : Above 9% 🔺Credit -Deposit Ratio : 65-70% 🔺Gross Non Performing Assets Ratio : 3-5% 🔺Liquidity Coverage Ratio (Short term liquidity management upto 30 days) & Net Stable Funding Ratio (liquidity management upto one year) 🔺Investment To Deposit Ratio : 25-30% 🔺Current Account Saving Bank Account Ratio : 45-55% 🔺Cost To Income Ratio : Cost-to-income ratio compares the bank's operating expenses to its operating income. The cost-to-income ratio quickly illustrates how effectively a bank converts revenue to profit. A lower ratio means that the bank is spending less to generate more revenue, which is a sign of efficiency. 🔺Return On Assets Ratio : ROA ratio measures how well the bank is using its assets to generate profits. It is calculated by dividing the net income by the average total assets. A higher ratio means that the bank is earning more from its assets, which is a sign of efficiency. 🔺Return On Equity Ratio : ROE ratio measures how well the bank is rewarding its shareholders. It is calculated by dividing the net income by the average shareholders' equity. A higher ratio means that the bank is generating more profits for its owners, which is a sign of efficiency. 🔺Non-Interest Income To Total Operating Income Ratio : The non-interest income ratio measures how much of the bank's income comes from sources other than interest, such as fees, commissions, or trading. It is calculated by dividing the non-interest income by the total operating income. A higher ratio means that the bank is diversifying its income streams, which is a sign of efficiency. 🔺Efficiency Ratio : Banks monitor their ability to generate non-interest income vs non-interest expense. The most popular ratio is used non-interest expense divided by the sum of net interest income and non-interest income. 🔺Provisioning Coverage Ratio : Above 70% PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster. 🔺Leverage Ratio (LR) : LR requires a bank’s tier-I capital to be at least 3.5% of its total exposure [ 4% For Domestic-Systemic Important Banks], which includes its equity, debt, derivative exposure & off balance sheet liabilities. Thanks for reading…

Evaluating The Bank’s Performance Through Ratio Analysis 🔺Capital To Risk Weighted Assets Ratio : Above 9% 🔺Credit -Deposit Ratio : 65-70% 🔺Gross Non Performing Assets Ratio : 3-5% 🔺Liquidity Coverage Ratio (Short term liquidity management upto 30 days) & Net Stable Funding Ratio (liquidity management upto one year) 🔺Investment To Deposit Ratio : 25-30% 🔺Current Account Saving Bank Account Ratio : 45-55% 🔺Cost To Income Ratio : Cost-to-income ratio compares the bank's operating expenses to its operating income. The cost-to-income ratio quickly illustrates how effectively a bank converts revenue to profit. A lower ratio means that the bank is spending less to generate more revenue, which is a sign of efficiency. 🔺Return On Assets Ratio : ROA ratio measures how well the bank is using its assets to generate profits. It is calculated by dividing the net income by the average total assets. A higher ratio means that the bank is earning more from its assets, which is a sign of efficiency. 🔺Return On Equity Ratio : ROE ratio measures how well the bank is rewarding its shareholders. It is calculated by dividing the net income by the average shareholders' equity. A higher ratio means that the bank is generating more profits for its owners, which is a sign of efficiency. 🔺Non-Interest Income To Total Operating Income Ratio : The non-interest income ratio measures how much of the bank's income comes from sources other than interest, such as fees, commissions, or trading. It is calculated by dividing the non-interest income by the total operating income. A higher ratio means that the bank is diversifying its income streams, which is a sign of efficiency. 🔺Efficiency Ratio : Banks monitor their ability to generate non-interest income vs non-interest expense. The most popular ratio is used non-interest expense divided by the sum of net interest income and non-interest income. 🔺Provisioning Coverage Ratio : Above 70% PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster. 🔺Leverage Ratio (LR) : LR requires a bank’s tier-I capital to be at least 3.5% of its total exposure [ 4% For Domestic-Systemic Important Banks], which includes its equity, debt, derivative exposure & off balance sheet liabilities

Evaluation Of The Bank’s Performance Through Ratio Analysis ▪️Capital To Risk Weighted Assets Ratio : Above 9% ▪️Credit -Deposit Ratio : 65-70% ▪️Gross Non Performing Assets Ratio : 3-5% ▪️Liquidity Coverage Ratio (Short term liquidity management upto 30 days) & Net Stable Funding Ratio (liquidity management upto one year) ▪️Investment To Deposit Ratio : 25-30% ▪️Current Account Saving Bank Account Ratio : 45-60% ▪️Cost To Income Ratio : Cost-to-income ratio compares the bank's operating expenses to its operating income. The cost-to-income ratio quickly illustrates how effectively a bank converts revenue to profit. A lower ratio means that the bank is spending less to generate more revenue, which is a sign of efficiency. ▪️Return On Assets Ratio : ROA ratio measures how well the bank is using its assets to generate profits. It is calculated by dividing the net income by the average total assets. A higher ratio means that the bank is earning more from its assets, which is a sign of efficiency. ▪️Return On Equity Ratio : ROE ratio measures how well the bank is rewarding its shareholders. It is calculated by dividing the net income by the average shareholders' equity. A higher ratio means that the bank is generating more profits for its owners, which is a sign of efficiency. ▪️Non-Interest Income Ratio And Efficiency Ratio : The non-interest income ratio measures how much of the bank's income comes from sources other than interest, such as fees, commissions, or trading. It is calculated by dividing the non-interest income by the total operating income. A higher ratio means that the bank is diversifying its income streams, which is a sign of efficiency. Efficiency Ratio : Banks monitor their ability to generate non-interest income vs non-interest expense. The most popular ratio is used non-interest expense divided by the sum of net interest income and non-interest income. ▪️Provisioning Coverage Ratio : Above 70% PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster. ▪️Leverage Ratio (LR) : LR requires a bank’s tier-I capital to be at least 3.5% of its total exposure [ 4% For Domestic-Systemic Important Banks], which includes its equity, debt, derivative exposure & off balance sheet liabilities. Thanks for reading…

Bank’s Ratio Analysis ▪️Capital To Risk Weighted Assets Ratio : Above 9% ▪️Credit -Deposit Ratio : 65-70% ▪️Gross Non Performing Assets Ratio : 3-5% ▪️Liquidity Coverage Ratio (Short term liquidity management upto 30 days) & Net Stable Funding Ratio (liquidity management upto one year) ▪️Investment To Deposit Ratio : 25-30% ▪️Current Account Saving Bank Account Ratio : 45-60% ▪️Cost To Income Ratio : Cost-to-income ratio compares the bank's operating expenses to its operating income.  The cost-to-income ratio quickly illustrates how effectively a bank converts revenue to profit. A lower ratio means that the bank is spending less to generate more revenue, which is a sign of efficiency. ▪️ Return on Assets Ratio : ROA ratio measures how well the bank is using its assets to generate profits. It is calculated by dividing the net income by the average total assets. A higher ratio means that the bank is earning more from its assets, which is a sign of efficiency. ▪️Return On Equity Ratio : ROE ratio measures how well the bank is rewarding its shareholders. It is calculated by dividing the net income by the average shareholders' equity. A higher ratio means that the bank is generating more profits for its owners, which is a sign of efficiency. ▪️Non-Interest Income Ratio And  Efficiency Ratio : The non-interest income ratio measures how much of the bank's income comes from sources other than interest, such as fees, commissions, or trading. It is calculated by dividing the non-interest income by the total operating income.  A higher ratio means that the bank is diversifying its income streams, which is a sign of efficiency. Efficiency Ratio : Banks monitor their ability to generate non-interest income vs non-interest expense. The most popular ratio is used non-interest expense divided by the sum of net interest income and non-interest income. ▪️Provisioning Coverage Ratio : Above 70% PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster. ▪️Leverage Ratio (LR) : LR requires a bank’s tier-I capital to be at least 3.5% of its total exposure [ 4% For Domestic-Systemic Important Banks], which includes its equity, debt, derivative exposure & off balance sheet liabilities.

How To Evaluate The Banks Performance Through Ratio Analysis? ▪️Capital To Risk Weighted Assets Ratio : Above 9% ▪️Credit -Deposit Ratio : 65-70% ▪️Gross Non Performing Assets Ratio : 3-5% ▪️Liquidity Coverage Ratio (Short term liquidity management upto 30 days) & Net Stable Funding Ratio (liquidity management upto one year) ▪️Investment To Deposit Ratio : 25-30% ▪️Current Account Saving Bank Account Ratio : 45-60% ▪️Cost To Income Ratio : Cost-to-income ratio compares the bank's operating expenses to its operating income. The cost-to-income ratio quickly illustrates how effectively a bank converts revenue to profit. A lower ratio means that the bank is spending less to generate more revenue, which is a sign of efficiency. ▪️Return On Assets Ratio : ROA ratio measures how well the bank is using its assets to generate profits. It is calculated by dividing the net income by the average total assets. A higher ratio means that the bank is earning more from its assets, which is a sign of efficiency. ▪️Return On Equity Ratio : ROE ratio measures how well the bank is rewarding its shareholders. It is calculated by dividing the net income by the average shareholders' equity. A higher ratio means that the bank is generating more profits for its owners, which is a sign of efficiency. ▪️Non-Interest Income Ratio And Efficiency Ratio : The non-interest income ratio measures how much of the bank's income comes from sources other than interest, such as fees, commissions, or trading. It is calculated by dividing the non-interest income by the total operating income. A higher ratio means that the bank is diversifying its income streams, which is a sign of efficiency. Efficiency Ratio : Banks monitor their ability to generate non-interest income vs non-interest expense. The most popular ratio is used non-interest expense divided by the sum of net interest income and non-interest income. ▪️Provisioning Coverage Ratio : Above 70% PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster. ▪️Leverage Ratio (LR) : LR requires a bank’s tier-I capital to be at least 3.5% of its total exposure [ 4% For Domestic-Systemic Important Banks], which includes its equity, debt, derivative exposure & off balance sheet liabilities. Thanks for reading…

How To Evaluate The Banks Performance Through Ratio Analysis? ▪️Capital To Risk Weighted Assets Ratio : Above 9% ▪️Credit -Deposit Ratio : 65-70% ▪️Gross Non Performing Assets Ratio : 3-5% ▪️Liquidity Coverage Ratio (Short term liquidity management upto 30 days) & Net Stable Funding Ratio (liquidity management upto one year) ▪️Investment To Deposit Ratio : 25-30% ▪️Current Account Saving Bank Account Ratio : 45-60% ▪️Cost To Income Ratio : Cost-to-income ratio compares the bank's operating expenses to its operating income. The cost-to-income ratio quickly illustrates how effectively a bank converts revenue to profit. A lower ratio means that the bank is spending less to generate more revenue, which is a sign of efficiency. ▪️Return On Assets Ratio : ROA ratio measures how well the bank is using its assets to generate profits. It is calculated by dividing the net income by the average total assets. A higher ratio means that the bank is earning more from its assets, which is a sign of efficiency. ▪️Return On Equity Ratio : ROE ratio measures how well the bank is rewarding its shareholders. It is calculated by dividing the net income by the average shareholders' equity. A higher ratio means that the bank is generating more profits for its owners, which is a sign of efficiency. ▪️Non-Interest Income Ratio And Efficiency Ratio : The non-interest income ratio measures how much of the bank's income comes from sources other than interest, such as fees, commissions, or trading. It is calculated by dividing the non-interest income by the total operating income. A higher ratio means that the bank is diversifying its income streams, which is a sign of efficiency. Efficiency Ratio : Banks monitor their ability to generate non-interest income vs non-interest expense. The most popular ratio is used non-interest expense divided by the sum of net interest income and non-interest income. ▪️Provisioning Coverage Ratio : Above 70% PCR is the percentage of funds that a bank sets aside for losses due to bad debts. A high PCR can be beneficial to banks to buffer themselves against losses if the NPAs start increasing faster. ▪️Leverage Ratio (LR) : LR requires a bank’s tier-I capital to be at least 3.5% of its total exposure [ 4% For Domestic-Systemic Important Banks], which includes its equity, debt, derivative exposure & off balance sheet liabilities. Thanks for reading…

Analysis Of Key Financial Ratios In The Supervision Of Banks By The RBI While working in the Department Of Banks Supervision of Reserve Bank of India, I had the opportunity of inspecting some scheduled commercial banks. During the course of the bank’s inspection, I used to analyse following key ratios from the financial statements of the banks for SWOT analysis of the bank’s financial position : 1️⃣ Capital Adequacy Ratio (CAR) CAR measures a bank's financial strength and its ability to absorb potential losses. This To calculate CAR, a bank's capital needs to be divided by its total risk-weighted assets. (Ideal range :9-15%) 2️⃣ Cost to Income ratio The Cost to Income ratio (CIR) measures how efficient a bank is in managing its costs relative to its income. The ratio is calculated by dividing a bank's operating expenses by its operating income. (Preferable : 50-60%) 3️⃣ Credit To Deposit Ratio (CD Ratio) The Bank’s total CD ratio measures a bank's liquidity and its ability to fund its loan portfolio and is calculated by dividing a bank's total loans & advances by its total deposits. (Preferred range 65-70%) 4️⃣ CASA Deposits Ratio CASA stands for Current Account Saving Account and is used to refer to the deposits that banks hold in current and savings accounts. Having a higher proportion of CASA deposits in the overall deposit base is considered as a positive indicator of a bank's financial health, as it means that the bank has a larger pool of stable funding to lend out and generate revenue. (Ideal 40-60%) 5️⃣ Price To Book Ratio The P/B ratio measures the value of a bank's stock price relative to its book value and is calculated by dividing the bank's market capitalization, which is the total value of all its outstanding shares by its book value, which is the bank's assets minus its liabilities. 6️⃣ Net Interest Margin NIM measures the profitability levels of a bank's lending and deposit operations and is calculated by dividing the bank's Net Interest Income (NII) by its total interest-earning assets. (3-5%) 7️⃣ Provision Coverage Ratio (PCR) The PCR measures a bank's ability to cover its bad loans with the money it has set aside for that very purpose. It is calculated by dividing the total value of the bank's provisions for bad loans by the total value of its non-performing assets. [Preferable range of PCR 70-80%] 8️⃣ Gross NPA Ratio (Range 0-5%) & Net NPA Ratio (0%-3%) 9️⃣ Investment To Deposits Ratio (Preferable range 25-35%) 🔟 Liquidity Coverage Ratio & Net Stable Funding Ratio (100%) 1️⃣1️⃣ Leverage Ratio : It is a ratio of capital measure to exposure measure, expressed in terms of percentage. (Range 3.5-4%) Leverage Ratio = Capital Measure/Exposure Measure 1️⃣2️⃣ Return On Assets Ratio ROA measures how profitable a bank is by comparing the bank's net income to its total assets and is calculated by dividing the bank's net income by its total assets. (Preferable Range 1%-3%) Thanks for reading…