Innovative income source and risk in banking: a study of public sector banks in India Online publication date: Thu, 14-Jul-2022
by Shraddha Sharma; Geeta Sharma
International Journal of Public Sector Performance Management (IJPSPM), Vol. 10, No. 1, 2022
Abstract: Innovation is one of the key sources of growth simply as a new method, product, idea, etc. Globally, due to increasing competition, banks are looking for the innovative ways of income sources to increase their profitability. Like international banks, some of the Indian public sector banks are also following the trends of increasing other income to enjoy the diversification benefits. Considering the importance of income diversification, this study analyses the impact of income diversification on financial performance and risk profile of public sector banks in India from 2003-2016 using secondary data. Panel data regression results conclude positive impact of income diversification on performance of banks in India and indicate that increase in the share of non-interest income may also increase the risk profile of banks. The findings are helpful to the bank's management and regulators to make policy for strategic role of income diversification in value creation and risk-reduction for banks.
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