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What does the term "Net Interest Rate Spread" refer to in banking?

1. The total interest paid by a bank on deposits
2. The difference between the interest rate a bank earns on loans and pays on deposits
3. The interest rate charged on credit card loans
4. The profit margin after deducting operational costs

Correct answer: The difference between the interest rate a bank earns on loans and pays on deposits

Solution

Net Interest Rate Spread is the difference between the interest a bank earns on its assets, mainly loans, and the interest it pays on liabilities, mainly deposits. It is a key measure of banking profitability.

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