How do banks make money?

A thread🧵⬇️

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Banks pay interest on money that depositors keep with them and charge interest on loans given to borrowers.
The difference is theirs to keep.

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Here's how⬇️

Suppose you deposited Rs 10,000 with ABC bank. The bank agreed to pay you 8% interest per annum.

Next, the bank will take your Rs 10,000 and lend it to someone else and charge them an interest rate of 10%.

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So, the bank pays you 8% of Rs 10,000, i.e., Rs 800, and it gets 10% of Rs 10,000, i.e., Rs 1,000, as interest earned.

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Net Interest Income can be easily calculated from the bank's profit and loss statement.

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The net interest income is essentially a bank’s topline.

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