Earnings Credit Rate (ECR)

The earnings credit rate (ECR) is a measure of the interest rate that a bank pays on a customer's deposit account. The ECR is calculated by taking the average interest rate paid on all of the bank's deposit accounts and then subtracting the bank's cost of funds. The bank's cost of funds is the interest rate that the bank pays on its liabilities, such as deposits and borrowings.

The ECR is important because it is used to determine the profitability of a bank's deposit business. A high ECR means that the bank is making a lot of money on its deposit accounts, while a low ECR means that the bank is losing money on its deposit accounts.

The ECR is also used to compare banks to each other. Banks with a high ECR are considered to be more profitable than banks with a low ECR.

The ECR is calculated using the following formula:

ECR = (Average interest rate paid on deposits) - (Bank's cost of funds)

The average interest rate paid on deposits is calculated by taking the total interest paid on all of the bank's deposit accounts and dividing it by the total amount of deposits. The bank's cost of funds is calculated by taking the total interest paid on all of the bank's liabilities and dividing it by the total amount of liabilities.

The ECR is an important measure of a bank's profitability. A high ECR means that the bank is making a lot of money on its deposit accounts, while a low ECR means that the bank is losing money on its deposit accounts. The ECR is also used to compare banks to each other. Banks with a high ECR are considered to be more profitable than banks with a low ECR.