Are Bank Revenue Diversification Strategies Paying off for India?

Nagaraju Thota (), Pranesh Bhargava () and A. C. V. Subrahmanyam ()
Additional contact information
Nagaraju Thota: Birla Institute of Technology & Science, Pilani-Hyderabad Campus
Pranesh Bhargava: Birla Institute of Technology & Science, Pilani-Hyderabad Campus
A. C. V. Subrahmanyam: University of Hyderabad

A chapter in Studies in International Economics and Finance, 2022, pp 389-410 from Springer

Abstract: Abstract Banks worldwide are strategically diversifying their revenues to stabilize the earning profile and improve profitability. We revisit this hypothesis in the Indian context using a longer time series of bank performance data from 1999 to 2020, which coincides with the onset of 2nd financial reforms in the country. We observe that the increasing share of non-interest income in the total income of Indian banks reflects the adoption of revenue diversification strategies. We assessed the impact of non-interest income on profitability and risk of banks and find evidence that profitability and risk of the banks are positively associated with the non-interest income with varied trends for individual bank groups. We also investigated the impact of components of non-interest income, viz. fee, trading and miscellaneous income on bank profitability and risk, and observed that the impact is varied across banking groups. Overall, our findings suggest that the benefits from revenue diversification strategies for banks in India is positive, but it is dependent on bank ownership type and the components of the non-interest income. Our results are robust and provide measures of revenue diversification and its impact on profitability and risk.

Keywords: Banks; Non-interest income; Diversification; Profitability; Risk (search for similar items in EconPapers)
JEL-codes: G12 G15 G21 G28 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-16-7062-6_21

Ordering information: This item can be ordered from
http://www.springer.com/9789811670626

DOI: 10.1007/978-981-16-7062-6_21

Access Statistics for this chapter

More chapters in India Studies in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().