Sources of income of commercial banks –
Interest on Loans
Banks provide loans to individuals, industries and corporates, the interest coming from there is the biggest source of revenue for banks.
The simple business model of the bank is to earn interest by giving loans, which is why interest-earning is the biggest source of income of banks.
Returns on Investments
Banks invest in Government Securities and Gold and generate returns from these Investments.
Banks provide different types of services, for which they charge a fee.
Some Examples – Account Maintenance Fees, Credit Card fees, Custodian fees, Penalty and Investment Management fees.
Earn Commission on third-party Products
Banks also earn a commission from third-party insurance companies’ insurance products and mutual fund products.
From Forex Exchange
Banks also make money from foreign currency exchange, suppose you go abroad and you exchange currency and from there, banks take a commission from you.