Public-Sector Banks Depend on Interest Income

Public sector banks (PSBs) have a higher level of dependence on their interest income compared to the private sector banks as their fee-based earning from other services is declining, says an ASSOCHAM study.

The fee-based income of PSBs has decreased by 10 per cent, while that of the private sector banks has registered a sizable growth of 29 per cent in the last financial year, according to an Assocham Eco Pulse study on ‘Income Sources of Indian Banks.’

The economy is growing at an unprecedented rate of 9.4 per cent during 2006- 07 and the demand for fee-based services of the banks are certain to go up. Hence, initiating well-thought-out steps to enhance fee-based income may be essential for the banks, according to Assocham officials.

The high interest regime has increased the interest income of PSBs by 18 per cent, although it is less than the 44 per cent rise recorded by the private sector players in the last financial year.

Some of the major PSBs have registered a decline in their fee-based income in FY07, including United Bank of India (witnessing a downward trend by 26.76 per cent), State Bank of India (22.41 per cent), Allahabad Bank (21.98 per cent), Punjab National Bank (18.15 per cent) and Dena Bank (10.82 per cent).