With the central bank getting tough on credit expansion, most of the commercial banks are looking at increasing their fee-based income. And here, the private banks have shown strong progress with a 37.4% increase in the fee-based income in FY08 as against a 34.3% growth demonstrated by public sector banks (PSBs) during the same period.
However, a comparison between 23 PSBs operating in the country and six major private banks shows that the PSBs have increased the share of fee based income in the total income earned.
In the case of private sector banks, fee based income to total income ratio at the aggregate level showed marginal decrease during FY08, against that of FY07, and in the case of PSBs, fee based income to total income ratio showed an increase. But the ratio was higher in private banks compared to PSBs during both the time periods.
The aggregate total income of six private sector banks has increased by 43.6% from Rs 45,969 crore in FY07 to Rs 65,996 crore in FY08.Their total fee-based income has increased by 37.4% during the study period, decreasing the fee-based income to total income ratio from 21.82% in FY07 to 20.89% in FY08.
State-run banks, on the other hand, appeared more concerned about fee-based income. It has achieved an 31.2% growth in total income during FY08, and the fee-based income has increased by 34.3% to Rs 25,478 crore during FY08, from Rs 18,977 crore during FY07. And the fee-based income to total income ratio increased from 12.93% in 2006-07, to 13.24% in FY08.
Significant increase in the ratio was seen in the case of Allahabad Bank. The fee- based income to total income ratio of Allahabad Bank increased from 7.16% in FY07, to 12%in FY08. In Indian Overseas Bank, the ratio increased significantly from 6.22% in FY07 to 9.20% in FY08. For SBI , the ratio decreased from 15.37% to 15.08% during the above period.
Among private sector banks, YES Bank showed significant decline in the ratio. The fee-based income to total income ratio decreased from 24.88% in FY07, to 21.29% in FY08. Similarly, in the case of South Indian Bank, the ratio decreased from 9.12% to 8.69% during FY08. But in the case of ICICI Bank, the ratio decreased from 23.95% to 22.25% during the study period.
One interesting thing is that all private sector banks showed an increase in fee- based income during 2007-08, while 96% of public sector banks showed an increase in the fee-based income during the same period.