Determinants of bank interest margins: A panel evidence from south Asian countries

Abstract

This research paper explores net interest margin (NIM) in four major South Asian countries (Bangladesh, India, Nepal, and Pakistan). We use panel data from 405 banks. This study also shows the relative size of banks and their specific interest margins. In addition, we focus on industry-specific and financial specific variables. By employing Pool OLS, Fixed Effect, and Random Effect, we have concluded that the research and operating expenses required for liquidity and equity positioning for total asset rationing positively affect net interest margins, while the relative size of banks, market power, and economic growth have an opposite effect. This study contributes to the literature by identifying that size of banks, market power, and economic growth are important factors when it comes to net interest margin.