Interest Income of banks rises: AEP study

Mumbai, May 25 (UNI) Most of the commercial banks have witnessed a rise in their interest income to 14 per cent, in the fourth quarter of 2005-06, according to a study conducted by ASSOCHAM Eco Pulse (AEP).

India's largest commercial bank, State Bank of India saw a meagre decline of 1.6 per cent in its interest income, as the interest income of SBI slipped from Rs 8,648 crore in Q4 FY-05 to Rs 8,509 crore in Q4 FY-06.

Among major banks, HDFC Bank experienced an outstanding growth in its interest income, which amounts to about 59 per cent increase, from Rs 867 crore in Q4 FY-05 to Rs 138 crore in Q4 FY-06, the AEP study said.

The banks which have made phenomenal performance in this segment are ICICI (53 per cent), UTI Bank (50 per cent), Bank of India (26 per cent), Corporation Bank (22 per cent), Union Bank (19 per cent), Canara Bank and Indian Overseas Bank (17 per cent) and Oriental Bank (14 per cent).

The interest income for the banks comprises interest earned on advances, income from investments, interest/discount on advances/bills, interest on balances with RBI and other interbank funds.

Releasing the AEP study, ASSOCHAM president Anil K Agarwal said the hike in the PLRs led to a positive move in the interest income for the banks, as the credit growth gained a sharp momentum during 2005-06. Non-food credit remained the key driver of banking activity, growing by 37.3 per cent (Rs 3,95,379 crore) in FY-05, on top of 27.5 per cent (Rs 2,21,602 crore), a year ago.

The net profit of the banking industry has increased by about 28 per cent on an aggregate, on the back of a substantial rise of about 14 per cent in the interest income of the banks, with Dena Bank taking the lead. Dena Bank turned the corner by converting a loss of Rs 39 crore in Q4 FY-05 into a positive bottom line of Rs 130 crore in Q4 FY-06, thereby registering a noticeable rise of about 433 per cent.

Thus, the consequent rise in the interest income and reduction in the cost of deposits, the banks have also reaped the benefits of the widening margin in the interest spread, the study added.

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