CRAR (Capital to Risk Weighted Asset Ratio)

is the ratio which determines the bank's capacity to meet the time liabilities and other risks such as credit risk, operational risk, etc. In the most simple formulation, a bank's capital is the "cushion" for potential losses, and protects the bank's depositors and other lenders. This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.

NIM (Net Interest Margin) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders(for example, deposits), relative to the amount of their (interest-earning) assets. A performance metric that examines how successful a firm's investment decisions are compared to its debt situations. A negative value denotes that the firm did not make an optimal decision, because interest expenses were greater than the amount of returns generated by investments. Calculated as:

ROA (Return on Assets)

Another good metric for evaluating management performance is a bank's return on assets (ROA). When calculating ROA, remember that banks are highly leveraged, so a 1% ROA indicates huge profits. This is one area that catches a lot of investors: technology companies might have an ROA of 5% or more, but these figures cannot be directly compared to banks.

ROA = Net Profit / Average Assets

Net NPA
The net NPA to loans (advances) ratio is used as a measure of the overall quality of the bank's loan book. An NPA are those assets for which interest is overdue for more than 90 days (or 3 months). Net NPAs are calculated by reducing cumulative balance of provisions outstanding at a period end from gross NPAs. Higher ratio reflects rising bad quality of loans.