Determinants of Interest Margins of Banks in Sri Lanka

S.M. Susanthi Medha Kumari

South Asia Economic Journal, 2014, vol. 15, issue 2, 265-280

Abstract: Net interest margin (NIM) is an indicator of the level of efficiency of financial intermediation by banks. This study analyses the determinants of NIMs of domestic banks of Sri Lanka for the period of January 2002 to March 2011 based on the model developed by Ho and Saunders and its extensions using panel regression. Sri Lankan banks are inward looking in setting NIMs as operating costs, credit risk, risk aversion, non-interest income and capital adequacy requirements are determinants. Market competition, other regulations on banks, risk arising from the volatility of market prices and macroeconomic variables do not have a significant impact on the determination of NIMs.

Keywords: Interest margin; banks; Sri Lanka (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:sae:soueco:v:15:y:2014:i:2:p:265-280

DOI: 10.1177/1391561414548952

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