Sources of income of commercial banks –
1- Interest on Loans
- Banks provide loans to individuals, industries, and corporates, the interest coming from there being the biggest source of revenue for banks.
- The simple business model of the bank is to earn interest by giving loans, which is why interest-earning is the biggest source of income for banks.
2- Returns on Investments
- Banks invest in Government Securities and Gold and generate returns from these Investments.
3- Fee-Based income
- Banks provide different types of services, for which they charge a fee.
- Some Examples – Account Maintenance Fee, Credit Card fee, Custodian Fee, Penalty, and Investment Management Fee.
Earn Commission on third-party Products
- Banks also earn a commission from third-party insurance companies’ insurance products and mutual fund products.
From Forex Exchange
- Banks also make money from foreign currency exchange, suppose you go abroad and you exchange currency and from there, banks take a commission from you.