INCOME OF A BANK
HOW DO BANKS MAKE MONEY?
well, we all know that they take deposits at lower rates and lend that money at a higher rate of interest as a credit to borrowers.................................
BUT IS THAT THE ONLY WAY THEY EARN?
- Banks frequently offer capital market services to firms and investors. The capital markets are simply a marketplace that connects firms that want finance to support expansion or projects with investors who have funds but want a return on their investment. Client payments are collected in exchange for the services. Capital market income is a highly volatile source of revenue for banks. They are entirely dependent on the activity of the capital markets at any particular time, which might change dramatically. In general, activity will reduce during periods of economic recession and increase during moments of economic prosperity.
Banks also charge non-interest fees for their services. For example, if a depositor opens a bank account, the bank may charge monthly account fees for keeping the account open.
when the borrowers are unable to pay they sell their collateral at a higher rate to cover up their expenses and sometimes make profits.
Bank charges penalties when there is a premature withdrawal of FD.
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