As core income of banks continued to remain muted in the lower single digit in Q4FY25, lenders are increasingly looking at providing full stack of value added services, other than traditional lending, to boost their other income, say senior bankers.
“We have made a cell in our head office led by a GM for this. We are making tie-up arrangements with large companies and then tapping them for vendor financing and supply chain financing. We will do this activity in a big way,” said Ashok Chandra, MD & CEO, Punjab National Bank.
State Bank of India’s (SBI) net interest income (NII) grew 4 per cent year-on-year (y-o-y) to ₹1.66 lakh crore in FY25, whereas other income was up 19 per cent y-o-y in FY25 at ₹61,683 crore. Bank of Baroda’s (BoB) NII grew 2 per cent y-o-y to ₹45,659 crore in FY25, while other income was up 15 per cent at ₹16,647 crore. ICICI Bank’s NII was up 9 per cent y-o-y at ₹81,165 crore, while other income rose 16 per cent to ₹26,603 crore in FY25.
Yes Bank, which recently concluded a deal with Japanese financial giant SMBC, is aiming to tap the latter’s multinational and domestic corporates for their cash management and other non-lending service requirements to boost fee income.
“It is important to have the capability to service corporate needs. Today, you don’t just give a loan to a corporate. You need to provide them solutions for cash management, digital solutions, which they are not able to offer as of now,” said Prashant Kumar, MD & CEO, YES Bank.
Jana Small Finance Bank, which recently applied to transition into a universal bank, feels it can cater to supply chain finance needs of mid-sized MSMEs and corporates after getting universal bank license.
“A lot of customers, whether it be mid-sized MSMEs or small corporates, they do a lot of good work on supply chain, invoice discounting, purchase invoice discounting, bank guarantees, but they are not sure whether SFB can support it, whereas we can do it. From that lens, servicing mid-sized MSMEs, small corporates, who need a dedicated bank (can be served after getting a universal bank license),” said Ajay Kanwal, MD & CEO, Jana SFB.
Anand Swaminathan, Senior Research Analyst, BofA Securities, said it is a natural evolution of any banking system to focus more on fee income.
“As you get more advanced, risk in credit goes down and you can only charge so much on yield. In India, we have a vibrant tech ecosystem. It enables a lot of value-added services to be provided to clients. This eventually increases productivity at corporates as well. The only question is whether it consolidates within big banks and smaller banks focus on the SME market,” he noted.