Comparative Study of Non Interest Income of the Indian Banking Sector

29 Pages Posted: 9 Jul 2009

See all articles by Gaurav Sharma

Gaurav Sharma

affiliation not provided to SSRN

Date Written: July 8, 2009

Abstract

There are two broad sources of bank revenues:

1. Interest income. 2. Non-interest income.

Interest income is generated from what is known as “the spread”. The spread is the difference between the interest a bank earns on loans extended to customers, corporate etc and the interest paid to depositors for the use of their money. It is also earned from any securities that the banks own, such as treasury bills or bonds.

Non-interest income is earned by providing a variety of services, such as trading of securities, assisting companies to issue new equity financing, securities commissions and wealth management, sale of land, building, profit and loss on revaluation of assets etc.

As compared to the developed world, the Indian banking sector, apart from the relying on traditional sources of revenue like loan making are also focusing on the activities that generate fee income, service charges, trading revenue, and other types of noninterest income. While noninterest income plays an important role in banking revenues in the developed world, its contribution to the total income of the Indian banking was 25% as on 31st March 2008.

Keywords: non interest income, indian banks, comparative analysis

JEL Classification: C10

Suggested Citation

Sharma, Gaurav, Comparative Study of Non Interest Income of the Indian Banking Sector (July 8, 2009). Available at SSRN: https://ssrn.com/abstract=1431288 or http://dx.doi.org/10.2139/ssrn.1431288

Gaurav Sharma (Contact Author)

affiliation not provided to SSRN ( email )

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