‘Other income’ saves the day for banks in these tough times

At a time when banks are struggling with stressed loan portfolios and lacklustre credit growth, ‘other income has come to their rescue — if the second quarter numbers are anything to go by.

This is not the case just for public sector banks but also with major private banks, including ICICI Bank and HDFC Bank. In the case of State Bank of India, a 35 per cent jump in ‘other income’ boosted profits of the bank.

The growth in ‘other income’ was mainly from sale of investments and treasury income.

“Banking is now becoming bankable in non-banking areas and also there is significant growth in fee-based income. The trend is going to continue and compensates for credit growth blues to some extent,” a top executive of SBI told BusinessLine .

Facts speak for themselves. HDFC Bank’s ‘other income’ constituted 27 per cent of its total with a 71 per cent increase in income from sale of investments/gain on revaluation.

For ICICI Bank, treasury income went up 62 per cent. So also for Corporation Bank and Andhra Bank, which posted 312 per cent and 37 per cent rise in income from sale of investments, respectively. According to Ajith Kumar Rath, Executive Director of Andhra Bank, which also posted a 43 per cent increase in non-interest income, proceeds from the sale of investments, recoveries and transaction fees, among others, contributed to the strong growth in ‘other income’.

Growth in CASA “When Current Account and Savings Account (CASA) are expanding, banks will also get income by way of transaction fees with increasing use of debit cards, etc,’’ he says. His bank has seen a 27 per cent growth in the current and savings accounts at ₹45,042 crore.

The increase in CASA may help banks by way of transaction charges on ATM/debit cards. In November 2014, the Reserve Bank of India reduced the number of free transactions at any non-home bank ATM from five to three in Mumbai, Delhi, Kolkata, Chennai, Bengaluru and Hyderabad. It also allowed banks to charge their customers for more than five transactions at their own ATMs.

SBI has reported a 5 per cent increase in income from transaction fees to ₹833 crore (₹793 crore) in the second quarter ended September 30, 2015.

Non-interest income for Union Bank of India went up 18.2 per cent to ₹960 crore, which included transaction fees, while for Corporation Bank, it increased to ₹431 crore (₹288 crore). It remains to be seen if non-interest incomes continue to be a saviour for banks in the days to come.

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