Know which commercial banks income is less riskier; NBB and SCB has more risk free income

Taking deposits and lending money is the basic function of a commercial bank. Banks usually charge higher interest on the money it lends than the interest it pays on deposits. The difference between interest earned and paid is called a bank’s net interest income. The income of banks in the form of net interest income is known as fund based income or funding income. Banks provide a number of other services in addition to lending and depositing money. For example, they provide credit and debit cards to their customers. Banks also charge fees for processing loans, card services, and a host of other services. For all the services offered, banks charge certain fees. Income earned through fees and other charges is called non-interest income or non-funding income. Net Interest Income contributes more than 75 percent to the overall banking income. Thus, net interest income plays a vital role in a bank’s performance. But contribution of non-funding income can’t be ignored since funding income has very much high risk. If any bank’s revenue stream has more non-interest income or non-funding income then we can consider that the particular bank has more diversified portfolio of income producing activities which signals low risk. The total income of the industry is Rs 85.32 arba. The funding income of industry is Rs 65.45 arba occupying 77 percent and non-funding income remains Rs 19.86 arba which is 23 percent of the whole industry. Nepal Bangladesh Bank (NBB) and Standard Chartered Bank (SCB) have higher percentage of risk free income. 9 commercial banks risk free income is more than 25% and less than 30%while 7 banks risk free income is less than 25% and more than average industry’s income. 10 commercial banks risk-free income is below industry average.