A Definitive guide on sources of income for a Bank.
                     A DEFINITIVE GUIDE 
ON SOURCES OF 
INCOME FOR A 
BANK
Interest on loans
• Banks provide various loans and advances to 
industries, corporates and individuals. 
• The interest received on these loans is their main 
source of income.
Source: economictimes.indiatimes.com
Interest on investments
• Banks invest in various government and rated 
securities, and earn interest and dividends from 
these investments.
Source: economictimes.indiatimes.com
Fees income
• Banks charge fees for performing services like 
syndication of loans, accepting bills of exchange, 
providing safety vaults, etc. for their customers.
Source: economictimes.indiatimes.com
Forex operations
• Banks also deal in foreign exchange and act as 
brokers for the same, earning an income from 
these operations.
Source: economictimes.indiatimes.com
Commission on third party products
• Banks earn commission income by distributing 
insurance and mutual fund products to their 
customer base.
Source: economictimes.indiatimes.com
Capital Markets-Related Income
• Banks often provide capital markets services for 
corporations and investors. 
• Capital markets related income is a very volatile 
source of income for banks. 
• They are purely dependent on the capital markets 
activity in any given time period
Source: economictimes.indiatimes.com
Covered bonds
• Covered bonds are backed by cash flows from 
mortgage securities. 
• All the major banks have issued covered bonds 
over the past two years.
Source: economictimes.indiatimes.com
Term deposits
• Term deposits are also a very low-risk investment. 
However, a bank is not required to repay term 
deposit holders should the bank collapse.
Source: economictimes.indiatimes.com
Property Rental Yields & Infrastructure Income
• These are interest rate sensitive sectors where 
rental income from property and infrastructure is 
linked to the risk-free rate.  
Source: economictimes.indiatimes.com
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