Nikhil nim is function of leverage , spread is not.
let me explain if comp has 100 Rs. as capital and 400 Rs. of debt and has advances of 500 Rs. lets assume cost of funds at 8% and yield at 10% so spread is 2%
nim in Rs. will be (500*10%) – (400*8%) = 18 Rs.
nim as % of advances will be 18/400 = 4.5%
now if they have lower leverage say instead of 400Rs. debt 350 Rs and capital of 150 Rs.
(assuming same cost of fund and yield)
nim will be (500*10%) -(350*8%) = 22 Rs.
nim in % will be 22/350 = 6.2%
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