Banking activities has undergone a structural transformation in the last two decades. Apart from traditional banking activities there are other related financial services that the banks have now started to offer and various other investments that it has started to undertake. Such diversification has led to the dynamics of cost to change over time and has now been proved to be sensitive to other elements present in the balance sheet. In this paper, an attempt at understanding the cost dynamics is made in order to assess the possible factors that that have bearing on it. The analysis has been done with an econometric approach to facilitate a better understanding of the dynamic relation that cost of funds has with other variables. For that, a set of panel data has been considered in which altogether six banks, three public sector banks and three private sector banks, are studied for better assessment of the results, data is drawn on quarterly basis for the time period 2005Q1-2023Q2 . On the given data set, Pooled OLS, Fixed and Random Effect Methods have been applied and the results have been compared using Hausman Test and the presence of time and individual effect has further been identified to evaluate the results obtained using different models. In order to assess the stability of the model, recursive CUSUM test has been used to draw a meaningful conclusion at the end of the process.