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What ratios will help you analyse safety of your bank?

What ratios will help you analyse safety of your bank?
By Karan Kapoor
Financial ratios are generated to gather accurate knowledge about a business by using numerical values derived from financial statements. Those are in relations that are derived by the financial reports of an organisation and used for comparative purposes. Definitions cover metrics most commonly referred to as income gain, asset appreciation, and debt-to-equity, and many more. The product of splitting one account balance or financial calculation with another is a ratio.

Gross NPA 
Gross non-performing assets is a term used by financial institutions to refer to the amount of all deferred debt that is categorised as non-performing loans.
Credit institutions give loans to their clients that are not accepted, and financial institutions are obligated to mark them as non-performing assets after ninety days because they do not earn either principal or net payments.

Net non-performing assets is a term used by financial institutions to relate to compensation for risky and uncertain obligations to the amount of non-performing loans. Credit unions must have a precautionary sum to offset the loans that were not paid.
Therefore, if one deducts the unpaid debt clause from the outstanding obligations, the resultant balance applies to the non-performing net assets.

Provision Coverage Ratio 
A coverage ratio broadly speaking, is a group of measurements of the ability of a firm to service its debt and fulfil its financial obligations such as interest payments or dividends. The higher the payout level, the cheaper it is to pay interest on the loans or pay dividends.

Capital Adequacy ratio 
The Capital Adequacy Ratio sets financial requirements by assessing the ability of a bank to cover liabilities and respond to credit risks and operating risks. A bank with a decent CAR has ample money to cover any possible losses. It thus has less chance of being insolvent and of losing funds from the depositors.

CASA ratio (Current Amount to Savings Account Ratio)
A bank's CASA ratio is the ratio of current and saving account deposits to gross deposits. A higher CASA ratio implies a lower fund expense as banks typically offer no interest on current account deposits and interest on saving accounts is generally very low 3-4%.

Credit-deposit ratio 
Deposits are the Bank's responsibility. So the credit-deposit ratio generally implies the banks' asset-liability ratio. If the ratio of Credit to Deposit is too low, banks do not gain as well as they can, and it also means that banks may not completely utilise their money.

Net interest margin 
Net interest margin (NIM) is a metric comparing the net interest income created by a financial institution from credit products such as loans and mortgages, with the existing interest it charges to savings accounts and Certificate of Deposits(CDs).
Simply put: a favourable net interest margin means an enterprise is running profitably, whereas a lower result indicates the inefficiency of the project.

Return on Assets 
Return on Assets(ROA) is a measure of how profitable a company is relative to its total assets. ROA provides an insight into a boss, customer, or consultant as to how effectively an organisation tries to leverage its money to earn income. The return on the assets is shown as a percentage.

These are the financial ratios with which you can analyse whether your bank is safe or not, because it is very crucial to understand whether your bank is going in loss, or into bankruptcy. Such problems should be pre-analysed, and some steps towards safety should be taken care of. 
Precaution is better than cure!