When bank accepts deposits, it pays interest on the deposit to the customer and user. When the bank lends money, it will charges interest on the money lent to the customers and also, the bank will provides certain services to its customers for a fee. Thus, the business of a bank is based on this principle of • the difference in interest received on the amount lent and the interest paid on the deposits collected. This difference between interest earned and paid is also called Spread. Income received by means of fees for the services rendered
In very simple terms, the business model of a bank can be summarised as follows -
Profit = ( IR – IP ) – (OC + OE) + FI
Where,
IR - Interest Received on Advances.
IP - Interest Paid on Deposits.
OC - Operating Costs.
OE - Operating Expenses.
FI - Fee based Income.
Do you want to know more about banking details that how core banking system works and the others about banking stuff then click here
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In very simple terms, the business model of a bank can be summarised as follows -
Profit = ( IR – IP ) – (OC + OE) + FI
Where,
IR - Interest Received on Advances.
IP - Interest Paid on Deposits.
OC - Operating Costs.
OE - Operating Expenses.
FI - Fee based Income.
Do you want to know more about banking details that how core banking system works and the others about banking stuff then click here
Note:All content is copyrighted to http://sm-information.blogspot.com and may not be reproduced on other websites.
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