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Lucknow. Whenever there is mention of bank’s earnings, the first thought that comes to our mind is the huge interest charged on home loan or car loan. We think that banks earn profits only from interest, but the reality is much more interesting and broader than this. In today’s modern era, banks are not only dependent on interest, but a major part of their earnings is “Non-Interest Income” (Income other than interest) comes from. This is the reason why even when the Reserve Bank reduces the repo rate or interest rates fall, the profits of banks remain at record levels.

Let us understand in the reporter style of Amar Ujala, how banks earn billions, from small charges deducted from your pocket to big corporate deals.

1. Fees and service charges: Small drops create an ocean of income

Banks charge a fixed fee for every small task they get from you. This amount may seem small to you, but by connecting with millions of customers, it turns into a huge income:

ATM Charge: Fees charged for withdrawing money in excess of the prescribed limit.

Penalty: Penalty for not maintaining minimum balance (AMB) in the account.

Annual Fee: The annual charge on your debit and credit cards.

Convenience Fee: Charges for services like SMS alerts, check book issuance and duplicate statements.

2. Loan processing and prepayment charges: Earning even before interest starts

Banks do not just make money from loan installments (EMIs), but their earnings start as soon as the loan process starts:

Processing Fee: While approving the loan, banks charge file charges or processing fees, which can run into thousands and lakhs.

Foreclosure Charge: If you want to repay your entire loan ahead of schedule, many banks charge a ‘prepayment penalty’.

3. Treasuries and Smart Investing: Profit from market movements

Banks do not just distribute the money deposited by you in loans. They invest a large part of that money in safe instruments like government bonds, treasury bills and stock market. When interest rates fluctuate in the market, banks earn huge profits (Trading Profit) by buying or selling these investments at the right time.

4. Forex and foreign transactions: income from across borders

If you exchange currency (dollars, euros, etc.) for travel abroad, banks add their margin to the exchange rate. Other than this:

money coming from abroad (Remittance) fees.

Heavy commission charged for issuing LC (Letter of Credit) in export-import business.

5. Bancassurance: Insurance and mutual fund commissions

Nowadays whenever you go to a bank, the manager advises you to take an insurance policy or mutual fund. Actually, banks work as an ‘agent’ for these companies. Whenever a customer buys an insurance or investment plan through a bank, the bank gets a huge commission from that company. in banking language ‘bancassurance’ is called model.

6. Digital Payment and Merchant Services

In the era of cashless economy, digital transactions have become a strong pillar of income for banks. Banks charge a small ‘Merchant Discount Rate’ (MDR) or transaction margin on every transaction made through POS machines installed at shops and online payment gateways. Even though UPI is free for the common man, banks are continuously earning money from other digital channels.

7. Investment Banking and Advisory

This earning is away from the eyes of common customers. Big banks play the role of advisors in IPO of companies, merger of two companies or big corporate deals. In exchange for these high-profile deals, the bank lost crores of rupees. advisory fees Let’s collect.