How Banks Earn Income ? || Income Sources of Banking Corporations || Income of Indian Banks

1. Interest on Loans: The main source of income of the Banks receive from Interest on Loans. As we know we receive 4% to 5% interest on Savings accounts as interest & 6% to 7% on Fixed Deposits and other Investments. But whenever banks gives loans to other parties/customers they charge higher Interest Rate from them which can goes up to 15%. So, the Difference of Interest Given by Banks to customers and Interest Received from Loan Takers is the Income of the Banks

2. Interest on Investments: Bank only retain 15% of the Public Deposits in the Bank in the form of cash for the daily outflow by/for the customers. Remaining percentage always invested by the Banks in Foreign Institutions, Bonds, Properties, Debentures, Shares & Mutual Funds. The Extra Income received on Those investments are the source of Income for the Banks

3. Bank Charges: Bank deduct various charges on many services they offered to Customers. Example:

a) Charges on Debit Cards

b) Charges on Cheque Book Issue

c) Charges on Transactions on selected merchant Payments

d) Charges on Bank Statement Generation

e) Charges on Cancelling or Bouncing off of Cheque

f) Annual Maintenance Charges

g) SMS Charges etc.

There are numerous charges which we will tired of counting. So, just for your Ides: Bank Charges are another big source of Income for Banks. In this case, Private Banks earn a lot more than Government Banks

4. Professing Fee/Charges: Whenever we take loan from Bank or assign bank to do some task on our behalf, Bank always charge Processing Fee on that. This is always a nominal amount but receiving this nominal amount from millions of Customers makes the Processing Fee huge which adds a contribution in Banking Income

5. Partnership with Merchants/Vendors: In online shopping, we can see that sometimes selected banks provides discounts & cashback on Credit Card Payments, Debit Card Payments & Payments through Internet Banking. Here, Banks collaborate with Online Shopping & Payments merchants and provide offers. Whenever a customer visit the store, the bank offer attracts him/her and he will purchase that good. In Return, Online merchant will provide some percentage of sale to Banks because of that bank offer they can generate their sales volume. This is an effective & emerging strategy to earn online through online shopping & payments

6. Forex Transactions: In this world of international online payments, one can easily transfer amount from one country to another. But as per RBI Compliance, Bank will charge some percentage of amount whenever we do foreign transactions. Although these charges are implemented by RBI and some of the part will transfer to them but apart from these bank will also get some amount as charges which adds their income volume.

7. Selling Products & Services: Banks also deals with Mutual Funds Services, Credit Cards and selling of Shares & Debentures. On Every purchase/transaction on MF, Shares & Debentures they got some income from customers. Banks sell their own credit cards and earn in same way as they are earning as Bank Charges, Monthly or Annually Charges, SMS Charges and many more

8. Other Services: Bank also charge amounts on selected services they offer to Costumers and in investments:

a) Charges on Lockers Facility

b) Dividends received on Investments

c) Bidding & Auctions of Mortgaged Property

d) Purchase of foreign currency

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