19 Jan 10 The Benefits Of Creating A Residual Income From Home

Many people decided to pursue an additional source of income on a home based business in the Health and Wellness industry. They will learn about the best win-win opportunity to create a financial security for themselves and their families which is something vital in this time of era. This kind of professional career and business is taking off because they offer the following benefits:

1 Financial Freedom

It offers you another stream of income flowing into your life on an ongoing basis so that you can fulfill your desires such as having a new home or car, holidays and travel, children’s education, caring for aged parents, quality retirement, etc.

2 Time Freedom

Time to spend as you wish instead of working at a job or running a business from dawn till dusk for the best years of your life.

3 Good Health

Have vitality, good health and well-being.

If just one of the above components is missing, it will impact the quality of your life. For example, if you have plenty of time and money but poor health, you can’t enjoy life to its fullest. If you don’t have enough savings to go through your retirement, you may be prevented from being able to have and to do certain things in life.

Think about it. Can Life Be Better? What will you be doing differently today if time and money are of no object?

The Wealth Crisis

According to the latest statistics, the average Australian will be in retirement for at least 25 years. Yet, only 5% will be financially independent by age 65. The remaining 95% will be deceased, still working part-time to make ends meet or broke on the pension.

Fact: You will either be among the top 5% or the remaining 95%.

Many people are ill-prepared for retirement. Most underestimate the amount of savings they require to live comfortably in their golden years. As life expectancies continue to improve, and costs continue to rise, there is a real concern that the superannuation nest-egg alone will not be sufficient for most, in their old age, to maintain the lifestyle they are accustomed to.

There is a saying that by the time you can have your superannuation fund, its purchasing power has been reduced by inflation to about 20% of what you can buy today.

The solution is not to save more (although that’s a good piece of advice), but to earn multiple streams of income.

There are smarter ways to earn:

1. Leverage Your Income

There are many ways to earn money. You can work alone, or you can work with others as a team helping each other. Straight salary is linear income. It does not matter whether you are a doctor, dentist, lawyer, accountant, engineer, teacher, or whatever you get paid by the hour for only when you work. No work, no pay.

Worse still, nowadays, more and more high paying jobs will be performance-based. This means bonus which consists of a fair portion of the total remuneration is only payable if what you agreed to deliver has been delivered on time, not how many hours you spend on the job. As a result, long hours and stress are quite common.

Professionals and employees trade their own time and effort for money. But there is a limit to how much wealth one can accumulate this way.

The best way is to earn residual income which is income that keeps flowing to you even when you are not working like copyrights created by authors, pop artists and successful network marketers.

Most multi-millionaires use leveraging in one form or another to generate wealth. They understand that the combined time and effort of many people always offer a much bigger income potential than what one can earn alone.

2. Create A Residual Income Stream

Workers get paid each hour, each fortnight, or each month that they provide a service.

Smart people continue to earn into the future, based in part on initial efforts. This residual value gives them not only the money, but the time freedom to enjoy it too.

Despite prejudices and misinformation, the Health and Wellness network marketing industry has grown to over USD 100 billion in revenue. The ageing of baby boomers; X and Y Generation who place more emphasis on balanced lifestyle/family than that of their parents will lead to a boom in the health and wellness industry.

The so-called “baby boomer” generation is now in their forties to sixties. Many are at the height of their earning and spending power. They make up about one-third of the population and account for about two-thirds of spending. Thus, knowing which industries the baby boomers are supporting is a key to financial success.

Two of the most powerful economic trends of today are:

1)Health & Nutrition

Health and nutrition is one of the biggest economic trends of our time. According to Money Magazines, the nutrition industry is the mother of all trends.

“When I look forward to the year 2010, I see a clear one trillion dollar business just in the growth of the existing products and services in the wellness industry” Paul Zane Pilzer, World-renowned economist and trend-forecaster

Why is health & nutrition set for explosive growth?

People are more aware of the role supplementation plays in optimizing long-term health. Hence the number of people seeking quality products to maintain good health is growing rapidly.

2)Network/Relationship Marketing

Relationship marketing is growing in prominence. It is a degree level subject taught at some of the most reputable universities in the world today including Harvard University and the University of Southern California.

Two highly respected professionals, Dr Charles King and James Robinson have co-authored a book “The New Professionals and The Rise of Network Marketing as the Next Major Profession”, which provides valuable insights to this industry. Dr King is a Professor of Marketing at the University of Illinois and Mr. Robinson is former Senior Vice-President of the U.S. Chamber of Commerce.

Why is Network Marketing set for explosive growth?

More and more companies are now turning to network marketing as a mean of distributing their products as advertising and traditional distribution channels are getting more expensive. The more effective marketing system to retain loyal customers is through relationship marketing. However, companies can’t do this by themselves. If they can do it, they don;t need you. Therefore, they need you to distribute their products through relationship network marketing.

A good network marketing company can provide ordinary people a legitimate home-based business that builds income with excellent leverage and residual value. The smart ones are joining companies in the Health and Nutrition industry, and the even smarter ones are joining the best companies in the Health and Nutrition industry’s companies that have good reputation in their products and are likely to be around for a long, long time. Some companies allow you to pass the legacy of your business to your benefactors.

Here are some points to consider on how to choose a good network marketing company:

1 A Company That Has An Unquestioned Devotion to Quality

At the end of the day, you get pay commissions only when sales are made. Thus, you would only want to get in a company that offers products which are formulated and manufactured to standards that exceed many nutritional products on the market and they work. Repeat sales is what give you leverage. So, you want your customers to buy the products month in month out and that only happen if the products work. Better still you see whether many doctors, health professionals and world class athletes that can trust their health to the products.

2 The company’s forward growth potential

What is the company’s strategic growth plan and its policies? It pays to join a company that pays you on sales volume generated worldwide in a single, seamless commission plan so that when different countries open, and others to come on-stream, it offers you to build business internationally.

3 A Global family that cares

Nowadays, people are drawn to a company’s dedication to a worthy cause and not just making profits for the stakeholders. For example, CEO of Usana Health Sciences, Dr Myron Wentz, has a passionate dream of “A world free from suffering, live life to its fullest” that leads him to establish the state-of-the-art Sanoviv Medical Institute in Baja, Mexico, as well as the Wentz medical Centre for children in Gaba, Uganda.

He also has a passion to help children in need. He has donated millions to the Children’s Hunger Fund since 2001. Through these donations, children in many poor areas of the world receive food, health and love.

4 A Pay Plan that builds real residual income

Many network marketing opportunities pay a lot to the fortunate few at the top of the hierarchy, and set high demands that the average person has little chance of attaining. Make sure to find the one that has the ‘best match’ for you that you can attain.

5 An enviable record of financial strength

Choose a company that will be there for many years to come knowing that the company has the resources to pay you true residual income. Otherwise all your hard work will go down the drain.

Health is Wealth

Nutritional supplement company provides your body with the nutrients required for optimum health.

Health is wealth to the sick. Thus, the cost of the products is insignificant when compared to the benefits it generally provides, including the following:

1. Improved health and well-being

2. Counteracting free-radicals in your body

3. Provide possible relief from an existing problem

4. Cash savings as you no longer need to consume other nutritional products and possibility reduce medications

5. Ability to work and earn an income more efficiently due to improved health and well-being.

Money is Wealth

The company provides you with an opportunity to become financially secure. All you need to do is introduce others to the company’s products.

With some initiative and effort you can generate an income stream to supplement or replace your salary from full-time employment. As the alternate health industry is growing rapidly, this means more and more people are taking preventative measures to protect their health.

In summary, you can’t lose even if you are not interested in a work at home business in a relationship marketing in the health industry. At worst, you will improve your own health and that of your loved ones. At best case scenario is that you will improve your own health and that of your loved ones and generate another stream of income for yourself while spreading health and wealth to others.

Jackie Khor is a leader in Network Marketing. She is best known for her down-to-earth, no-nonsense training. Get your FREE 10-Day email Boot Camp on at WorkAtHomeBusiness

Free videos on how to generate your own leads and set up business on the internet at Generate Your Own Free Leads

Tags: Benefits, Creating, From, Home, income, Residual

Filed in Uncategorized with 0 Comments

19 Jan 10 Comparative study of non interest income of the Indian Banking Sector, a study of non interest income

Overview Of Banking Project

Title: Comparative study of non interest income of the Indian Banking Sector

Submitted by:

Gaurav Sharma

BBA(Finance, Gold Medal),MBA(Finance)

gksindia1@gmail.com

Index

Introduction 1

Methodology 3

SBI& Associates 5

Nationalized banks(Public sector banks) 10

Private sector banks 15

Foreign banks 20

Findings 25

Conclusion 26

Literature review 26

References 26

Introduction

There are two broad sources of bank revenues:

Interest income Non-interest income.

Interest income is generated from what is known as “the spread.” The spread is the difference between the interest a bank earns on loans extended to customers, corporate etc and the interest paid to depositors for the use of their money. It is also earned from any securities that the banks own, such as treasury bills or bonds.

Non-interest income is earned by providing a variety of services, such as trading of securities, assisting companies to issue new equity financing, securities commissions and wealth management, sale of land, building, profit and loss on revaluation of assets etc.

As compared to the developed world, the Indian banking sector, apart from the relying on traditional sources of revenue like loan making are also focusing on the activities that generate fee income, service charges, trading revenue, and other types of noninterest income. While noninterest income plays an important role in banking revenues in the developed world, its contribution to the total income of the Indian banking was 25% as on 31st March 2008.

Components of non interest income

The major components of non interest income in our banking sector are as follows:

Commission/ exchange and brokerage Profit or loss on Sale of investments Profit or loss Sale of land& buildings Profit/loss on revaluation of investments Profit or loss on Exchange transaction etc. Miscellaneous income source which includes advisory, trading etc.

Share of various sources of non interest income

The share of various sources of non interest income to the total income of banking sector as on 31st march 2008 is shown in the pie chart below:

In the above figure we find that the highest contribution to the non interest income has been of the commission followed by sale of investments, miscellaneous income and exchange transactions.

Movements of interest and non interest income of the Indian banking sector (1994-2004)

Methodology

Under this I have done a comparative study of non interest income of the Indian banking sector by classifying banks into four categories:

SBI and associates which includes State bank of India, State bank of Bikaner and Jaipur, State bank of Hyderabad, State bank of Mysore, State bank of Patiala, State bank of Saurashtra and State bank of Travancore. Nationalized banks: (Public sector banks) which includes Allahabad bank, Andhra bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara bank, Central Bank of India, Corporation bank, Dena bank, Indian bank, Indian Overseas bank, New bank of India, Oriental bank of Commerce, Punjab &Sind bank, Punjab National Bank, Syndicate bank, UCO bank, Union bank of India, United bank of India, Vijaya bank.( Total 19) Other scheduled banks: (Private sector banks) which includes Development credit bank, Times bank, Axis bank, Indus land Bank, ICICI bank, Bank of Rajasthan, Catholic Syrian bank, Lakshmi Vilas bank, HDFC bank, Centurion bank, Bank of Punjab, Tamilnad Mercantile Bank, Federal bank, Punjab Cooperative bank, Lord Krishna bank, ING Vyasya bank, IDBI bank, Dhanlakshmi bank.(total 18 banks) Foreign banks: which includes Barclays bank, ING bank, ABN Amro bank, Bank of America, BNP Paribas, Standard Chartered bank, DBS bank ,Citibank, HSBC, Deutsche bank, Mashreq bank, Bank of Nova Scotia, Bank of Bahrain & Kuwait, American Express bank (total 14 banks)

The banks used under private sector and foreign sector category are reflective of major portion of their respective market/category. Moreover data was not available for other banks within that category.

The period of study taken was 11 years i.e. 1994-2004. The period of study was taken as 11 years because, for the above mentioned period the data was available for all the bank and to ensure uniformity.

Objectives of the study:

To analyze the growth of non interest income as a source of revenue for the Indian banking sector over a period of 11 years (1994-2004). To analyze the contribution of major components of the non interest income over a period of 11 years (1994-2004). To find out statistically that how much of the profits of the banking sector over a period of 11 years is determined by non interest income and interest income. To find out statistically the contribution of various components of Non interest income towards the profits of the bank over a period of 11 years. To find out the contribution of interest and non interest income towards the total income in each of the 11 years (1994-04). To find out the correlation between the non interest income and the total income of the banking sector over a period of 11 years. To find out the reasons for the increase in the non interest income and what are the challenges involved to generate non interest income.

Tool used:

Data regarding the interest income, non interest income, profits, various components of non interest income, total income of the banking sector has been collected from the RBI website.

To find out the influence of interest and non interest income on the profits of the banking sector, I have made use of multiple regression tool in E-views software.

The interest and non interest income were independent variable and the profits of the bank was the dependent variable

Two Multiple Regression equation was used for the study:

Equation 1

Profits=a+b1*interest income+b2*noninterest income

Where b1 and b2 were coefficient and a is the intercept term which shows the profits of the bank had been c if interest and non interest income had been 0

Equation 2

Profits: a+b1*commission+b2*profit/loss on sale of land+ profit/loss on sale of investment+ profit/loss on revaluation of investment +profit/loss on exchange transactions+ Miscellaneous income

Where profits was the dependent variable and various components of non interest income were independent variable and a is the constant term

The equation 2 was used to find out the influence of various components of non interest income on the profits of the bank.

SBI and Associates

(Rs‘000)

In the above table we see the following:

Column1: Average

Column 2: Year

Column 3: Other income or the non interest income of the bank

Column 4: Commission, exchange and brokerage

Column 5: Net profit/loss on sale of investment

Column6: Net profit/loss on revaluation of investment

Column7: Net profit/loss on sale of land, building and other assets

Column 8: Net profit/ loss on exchange transactions

Column 9: Miscellaneous income

Column 10: Total income of the bank

Column 11: Profit/loss of the bank

Column 12: Interest income of the bank

Column 13: Noninterest income as a percentage of total income

Column 14: Interest income as a percentage of total income

Influence of interest and non interest income on profits of SBI& Associates

The above output is of the multiple regression equation where we have tried to find out that how much of the profits of the SBI and its associates are determined by interest and non interest income.

We find non -interest income to be a significant variable in explaining the profits of SBI as the prob value is less the .05 (.0095)and the value of t stat is more than 2(3.386)[ Rule: an independent variable is said to be significant is its prob value is less than .05 or the t-stat is more than 2). We find that in our regression model the percentage of variation in the profits of SBI and its associate that is explained by interest and non interest income is 92.81% ( Rule: for a regression model to be efficient the r-square shall be at least .6) From the above output we find that Noninterest income had a significant influence on the profits of SBI and its associates over a period of 11 years.

Influence of non interest components on profit of SBI& Associate

Model Summary

Model

R Square

Adjusted R Square

Std. Error of the Estimate

.990(a)

.981

.943

4040785.55743

a Predictors: (Constant), misc, plland, plexchange, pllinvest, plreav, comm

Coefficients(a)

Model

Unstandardized Coefficients

Standardized Coefficients

Sig.

Std. Error

Beta

(Constant)

-20565743.526

10099548.868

-2.036

.135

comm

2.109

.603

1.153

3.495

.040

pllinvest

.970

.255

.944

3.805

.032

plreav

27.569

76.257

.100

.362

.742

plland

76.158

97.743

.221

.779

.493

plexchange

-1.077

.815

-.135

-1.322

.278

misc

-4.728

2.151

-1.042

-2.198

.115

a Dependent Variable: profit

In the above regression output the independent variable used were various components of non interest income i.e. commission/exchange /brokerage, profit/loss on sale of investment, profit and loss on revaluation of investment, profit/loss on sale of land/building, profit/loss on exchange transaction and miscellaneous income. And the dependent variable used was the profits of the SBI& associates

The objective is to find out that which one of the non interest component had a major influence on the profit of SBI & associates over a period of 11 years.

We find the following:

The percentage of variation in the profits of the SBI& associates explained by the 6 independent variables is 98.1% which is significant(as R square shall be more than .6) We find that commission/exchange/brokerage and profit/loss on sale of investment had a major influence on the profits of the SBI and its associates over a period of 11 years. As they are having a prob values less than .05(level of significance) and is having a t-stat more than 2.

This means that SBI and its associates shall focus more on commission exchange and brokerage for its non interest income.

Contribution of various components of non-interest income of SBI& Associate(94-04)

The above pie graph has been prepared by taking into account the average values of non interest income components over a period of 11 years (94-04). From the above graph we find that commission/exchange and brokerage had around 59% (highest) contribution to the non interest income followed by sale of investment (20%). Exchange transaction was having a contribution of 12% and miscellaneous income was having an influence of 9%. The sale of land/buildings, revaluation of investment was having a very negligible influence on the non interest income.

Movements of interest and non interest income of SBI & Associates(94-04)

If we look at the movement of interest and non interest income of SBI and associates over a period of 11 years we will find that the non interest income has grown at a CAGR of 18.46% and the interest income has grown at a CAGR of 13.15%.The noninterest income over a period of 11 years has grown by 444.563% whereas interest income has increased by 244.14% which shows how aggressively the bank is working on its non interest income.

Contribution of interest and non interest income of SBI & Associate

From the above table we find the contribution of interest and non interest income as a percentage of total income in each of the 11 years period. We find the share of non interest income has increased over a period of time from 14% to 21% and share of interest income has decreased from 85% to 78%.

On an average over a period of 11 years the contribution of non interest income as been 15% and interest income has been 85% to the total income of the SBI and its associates.

Correlation between non interest income and total income

0.935642

There is a very positive correlation between non interest income and the total income of SBI and its associates which shows that higher the non interest income higher the total income of the SBI& associate.

Nationalized banks: Public sector banks

(Rs‘000)

In the above table we see the following:

Column1: Average

Column 2: Year

Column 3: Other income or the non interest income of the bank

Column 4: Commission, exchange and brokerage

Column 5: Net profit/loss on sale of investment

Column6: Net profit/loss on revaluation of investment

Column7: Net profit/loss on sale of land, building and other assets

Column 8: Net profit/ loss on exchange transactions

Column 9: Miscellaneous income

Column 10: Total income of the bank

Column 11: Profit/loss of the bank

Column 12: Interest income of the bank

Column 13: Noninterest income as a percentage of total income

Column 14: Interest income as a percentage of total income

Influence of interest and non interest income on profits of Public sector banks (94-04)

The above output is of the multiple regression equation where we have tried to find out that how much of the profits of the public sector banks are determined by interest and non interest income.

Non interest and Interest income are independent variables and profit is the dependent variable

From the above output we find:

We find non -interest income to be a significant variable in explaining the profits of public sector banks as the prob value is less the .05 (.0268) and the value of t stat is more than 2(2.7056) [Rule: an independent variable is said to be significant if its prob value is less than .05(level of significance) or the t-stat is more than 2]. We find that in our regression model the percentage of variation in the profits of public sector banks that is explained by interest and non interest income is 88.86%( Rule for a regression model to be efficient the r-square shall be at least .6) From the above output we find that noninterest income had a significant influence on the profits of public sector banks over a period of 11 years.

Influence of non interest components on profit of Public sector banks(94-04)

Model Summary

Model

R Square

Adjusted R Square

Std. Error of the Estimate

.974(a)

.948

.870

14640946.95589

a Predictors: (Constant), misc, plland, plreav, pllinvest, plexchange, comm.

Coefficients(a)

Model

Unstandardized Coefficients

Standardized Coefficients

Sig.

Std. Error

Beta

(Constant)

-84595095.339

58218744.505

-1.453

.220

comm

.151

5.866

.024

.026

.981

pllinvest

.017

.478

.014

.035

.974

plreav

-13.928

8.434

-.348

-1.651

.174

plland

48.353

63.394

.105

.763

.488

plexchange

5.954

8.910

.276

.668

.541

misc

3.451

7.536

.470

.458

.671

a Dependent Variable: profit

The objective is to find out which one of the non interest component had a major influence on the profit of public sector banks over a period of 11 years.

We find the following:

The percentage of variation in the profits of the public sector banks explained by the 6 independent variables is 94.8% which is significant(as r square shall be more than .6) We find that none of the non interest component was individually sufficient in explaining the profits of the public sector banks as we find that none of the non interest component is having a significance value of less than .5 or having a t-stat of more than 2.

Contribution of various components of non interest income of Public Sector banks (94-04)

The above pie graph has been prepared by taking into account the average values of non interest income components over a period of 11 years (94-04). From the above graph we find that commission/exchange and brokerage had around 36% (highest) contribution to the non interest income followed by sale of investment (35%). Miscellaneous income was having a contribution of 16% followed by exchange transaction i.e. 12%. The sale of land/buildings, revaluation of investment was having a very negligible influence on the non interest income.

Movements of interest and non interest income of Public sector banks(94-04)

If we look at the movement of interest and non interest income of public sector banks over a period of 11 years we will find that the non interest income has grown at a CAGR of 19.85% and the interest income has grown at a CAGR of 12.68%.The noninterest income over a period of 11 years has grown by 511.87% whereas interest income has increased by 230.03% which shows how aggressively the bank is working on its non interest income.

Contribution of interest and non interest income of the Public Sector banks(94-04)

From the above table we find the contribution of interest and non interest income as a percentage of total income in each of the 11 years period. We find the share of non interest income has increased over a period of time from 11% to 20% and share of interest income has decreased from 88% to 79%.

On an average over a period of 11 years the contribution of non interest income as been 13% and interest income has been 87% to the total income of the public sector banks.

Correlation between non interest income and total income of Public sector banks

0.940162

There is a very positive correlation between non interest income and the total income of public sector banks which shows that higher the non interest income higher the total income of the public sector banks.

Private sector banks

(Rs ‘000)

In the above table we see the following:

Column1: Average

Column 2: Year

Column 3: Other income or the non interest income of the bank

Column 4: Commission, exchange and brokerage

Column 5: Net profit/loss on sale of investment

Column6: Net profit/loss on revaluation of investment

Column7: Net profit/loss on sale of land, building and other assets

Column 8: Net profit/ loss on exchange transactions

Column 9: Miscellaneous income

Column 10: Total income of the bank

Column 11: Profit/loss of the bank

Column 12: Interest income of the bank

Column 13: Noninterest income as a percentage of total income

Column 14: Interest income as a percentage of total income

Influence of interest and non interest income on profits of Private sector banks(94-04)

The above output is of the multiple regression equation where we have tried to find out that how much of the profits of the private sector banks are determined by interest and non interest income.

Non interest and Interest income are independent variables and profit is the dependent variable

From the above output we find:

We find non -interest income to be a significant variable in explaining the profits of private sector banks as the prob value is less the .05 (.0128) and the value of t stat is more than 2(3.188) [Rule: an independent variable is said to be significant if its prob value is less than .05(level of significance) or the t-stat is more than 2]. We find that in our regression model the percentage of variation in the profits of private sector banks that is explained by interest and non interest income is 95.95 %( Rule for a regression model to be efficient the R-square shall be at least .6) From the above output we find that noninterest income had a significant influence on the profits of private sector banks over a period of 11 years.

Influence of non interest components on profit of Private sector banks (94-04)

Model Summary

Model

R Square

Adjusted R Square

Std. Error of the Estimate

.964

.912

.881

309483.83835

a Predictors: (Constant), misc, plreav, plexchange, pllinvest, plland, comm

Coefficients(a)

Model

Unstandardized Coefficients

Standardized Coefficients

Sig.

Std. Error

Beta

(Constant)

-775200.943

177724.748

-4.362

.012

comm

.493

.252

.311

1.955

.122

pllinvest

.623

.147

.672

4.240

.013

plreav

4.129

2.209

.062

1.869

.135

plland

108.894

14.560

.923

7.479

.002

plexchange

-2.522

.513

-.268

-4.915

.008

misc

3.314

.310

1.114

10.680

.000

The objective to find out which one of the non interest component had a major influence on the profit of private sector banks over a period of 11 years.

We find the following:

The percentage of variation in the profits of the private sector banks explained by the 6 independent variables is 91.2% which is significant(as r square shall be more than .6) We find that sale of investment , land & building and miscellaneous income and exchange transactions have a major influence on the profits of private sector banks over a period of 11 years as these variable are having a significance level of less than .05 and a t-stat of more than 2. According to the above output miscellaneous income had a major influence o the profits of the as it’s is having the maximum t-stat i.e. 10.680 so bank shall focus on it for its non interest income.

Contribution of various components of non interest income of Private Sector banks (94-04)

The above pie graph has been prepared by taking into account the average values of non interest income components over a period of 11 years (94-04). From the above graph we find that sale of investment has around 41%(highest) contribution to the non interest income followed by commission/exchange /brokerage 34% followed by miscellaneous income(17%) and exchange transactions 8%. The sale of land/buildings, revaluation of investment was having a very negligible influence on the non interest income.

Movements of interest and non interest income of Private Sector banks(94-04)

If we look at the movement of interest and non interest income of private sector banks over a period of 11 years we will find that the non interest income has grown at a CAGR of 43.50% and the interest income has grown at a CAGR of 33.95%. The non interest income over a period of 11 years has grown by 3604.74%% whereas interest income has increased by 1760.84% which shows how aggressively the private sector banks are working on its non interest income.

Contribution of interest and non interest income of Private sector banks (94-04)

From the above table we find the contribution of interest and non interest income as a percentage of total income in each of the 11 years period. We find the share of non interest income has increased over a period of time from 13% to 23% and share of interest income has decreased from 86% to 76%.

On an average over a period of 11 years the contribution of non interest income as been 17% and interest income has been 83% to the total income of the private sector banks.

Correlation between non interest income and total income of Private sector banks

0.987067

There is a very positive correlation between non interest income and the total income of private sector banks which shows that higher the non interest income higher the total income of the private sector banks.

Foreign banks

(Rs ‘000)

In the above table we see the following:

Column1: Average

Column 2: Year

Column 3: Other income or the non interest income of the bank

Column 4: Commission, exchange and brokerage

Column 5: Net profit/loss on sale of investment

Column6: Net profit/loss on revaluation of investment

Column7: Net profit/loss on sale of land, building and other assets

Column 8: Net profit/ loss on exchange transactions

Column 9: Miscellaneous income

Column 10: Total income of the bank

Column 11: Profit/loss of the bank

Column 12: Interest income of the bank

Column 13: Noninterest income as a percentage of total income

Column 14: Interest income as a percentage of total income

Influence of interest and non interest income on profits of Foreign banks (94-04)

The above output is of the multiple regression equation where we have tried to find out that how much of the profits of the foreign banks are determined by interest and non interest income.

Non interest and Interest income are independent variables and profit is the dependent variable

From the above output we find:

We find non -interest income to be a significant variable in explaining the profits of foreign banks as the prob value is less the .05 (.0006) and the value of t stat is more than 2(5.459) [Rule: an independent variable is said to be significant if its prob value is less than .05(level of significance) or the t-stat is more than 2]. We find that in our regression model the percentage of variation in the profits of foreign banks that is explained by interest and non interest income is 94.64%( Rule for a regression model to be efficient the r-square shall be at least .6)

From the above output we find that noninterest income had a major and significant influence on the profits of foreign banks over a period of 11 years

Influence of non interest components on profit of Foreign banks (94-04)

Model Summary

Model

R Square

Adjusted R Square

Std. Error of the Estimate

.995(a)

.990

.975

891916.79648

a Predictors: (Constant), misc, plland, plreav, pllinvest, comm, plexchange

Coefficients(a)

Model

Unstandardized Coefficients

Standardized Coefficients

Std. Error

Beta

Sig.

(Constant)

2987693.345

1103189.297

2.708

.054

comm

-.182

.245

-.131

-.744

.498

pllinvest

.371

.298

.158

1.248

.280

plreav

-15.101

9.845

-.094

-1.534

.200

plland

-9.579

5.393

-.123

-1.776

.150

plexchange

.808

.384

.485

2.101

.103

misc

2.657

.952

.580

2.790

.049

a Dependent Variable: profit

The objective is to find out which one of the non interest component had a major influence on the profit of foreign banks over a period of 11 years.

We find the following:

The percentage of variation in the profits of the foreign banks explained by the 6 independent variables is 99.0% which is significant(as r square shall be more than .6) We find that only miscellaneous income have a major influence on the profits of foreign banks over a period of 11 years as it is having a significance level of less than .05(.049) and a t-stat of more than 2(2.790).

Contribution of various components of non interest income of Foreign banks (94-04)

The above pie graph has been prepared by taking into account the average values of non interest income components over a period of 11 years (94-04). From the above graph we find that commission/exchange /brokerage was having around 48% (highest) contribution to the non interest income followed by exchange transactions 29%. The contribution of sale of investment was 17% followed by miscellaneous income 6% .The sale of land/buildings, revaluation of investment was having a very negligible influence on the non interest income

Movements of interest and non interest income of foreign banks (94-04)

If we look at the movement of interest and non interest income of foreign banks over a period of 11 years we will find that the non interest income has grown at a CAGR of 19.57% and the interest income has grown at a CAGR of 13.49%. The non interest income over a period of 11 years has grown by 497.394%% whereas interest income has increased by 254.54% which shows how aggressively the bank is working on its non interest income

Contribution of interest and non interest income of foreign banks (94-04)

From the above table we find the contribution of interest and non interest income as a percentage of total income in each of the 11 years period. We find the share of non interest income has increased over a period of time from 21% to 31% and share of interest income has decreased from 78% to 68%.

On an average over a period of 11 years the contribution of non interest income as been 23% and interest income has been 77% to the total income of the foreign banks.

Correlation between non interest income and total income of foreign banks

0.972437

Findings

We have seen that the contribution of non interest income of our banking sector has increased significantly over a period of 11 years. We have also seen that in each type of banks i.e. SBI, public sector banks, private sector banks and foreign banks the contribution of non interest income towards the total income has increased over a period of time and that of the interest income has decreased over a period of time. If we look at the total banking sector we will find that in our banking system the non interest income is having a significant influence on the profits of the banks. On an average the share of the non interest income towards the total income of the banking sector has increased from 12% in 1994 to 20% in 2004.If we look at the components of non interest income of our banking sector we will find that commission/exchange and brokerage earned by the banks had a major contribution i.e. 44% to the total noninterest income of the bank , after the commission the next big contribution to the non interest income had been of the sale of investments which was 28%, followed by exchange transactions having a share of 15%. Miscellaneous income was having the 13% contribution to the total noninterest income of the banking sector. The contribution of sale of land, revaluation of investments was having a negative or even a negligible influence on the noninterest income of the banking sector. On an average the non interest income of the banking sector has grown at a CAGR of 25% as compared to interest income which has grown at a CAGR of 18%. The percentage increase in the non interest income of the banking sector has increased by 1264.64% and interest income has increased by 622%. The private sector banks had seen a significant contribution in the increase of its non interest income over a period of 11 years as compared to other types of banks. Among the various non interest components that had an influence on the profits of the banking sector we find that commission, sale of investment, miscellaneous income had a significant influence on it. We also find that there was a positive correlation between the non interest income and the total income of the banking sector. We also find that in case of public sector banks none of the non interest component was found to be statistically significant enough to influence the profits over a period of 11 years.

Reasons for increase in the non interest income

Now if we look at the reason for the increase in the non interest income of the banking sector we will find that it has majorly increased due to following reasons:

With economy growing at an unprecedented rate of 9.4 per cent during 2006-07 and acceleration in the growth rate being attributable to the buoyancy in the industrial and service sector, the demand for fee-based services of banks has gone up and as a result of which the non interest income has also risen up. Noninterest income is an effective way used by banks to respond to its squeezing margins At the bank level, greater reliance on noninterest income, particularly trading revenue, is associated with lower risk-adjusted pro?ts attached to it.

Challenges involved

Not aggressive direct customer interaction of public sector banks. High cost and less expertise involved in launching of innovative products/services as per the customers’ expectations. Technology requirements.

Conclusion

After studying the non interest growth pattern of the Indian banking sector over a period of 11 years we can say that it is slowly and gradually becoming one of the important avenues for our Indian banks to generate revenue from. In this respect we see that not only private banks and foreign banks are ahead but also our public sector banks are gradually catching it. We can say that it to be an important source available with our banking sector to respond to the squeezing margins and meeting the shareholders expectations.

Literature review

1. Business Efficiency of Public Sector Commercial Banks: A Data Envelopment Approach :

Ram Pratap Sinha (2008)

The article says that following the nationalization of 20 major commercial banks in 1969 and 1980, the government followed policies of financial repression up to the 1980s. During this period the public sector commercial banks had rapid expansion of branches, especially in the rural and semi urban areas and had reasonable success in the matter of deposit mobilization and disbursement of loans. However, the operating efficiency of public sector commercial banks, declined during the period due to various reasons. In the 1990s, the banking environment was radically transformed by certain bold initiatives taken by RBI including the dismantling of entry barriers, rate deregulation, introduction of prudential accounting norm and the implementation of Basel I capital adequacy norms. The changed competition and accounting environment compelled the commercial banks to provide unprecedented attention to cost cutting and supplementing fund-based income by fee-based income.

Product mix and earnings volatility at commercial bank: evidence from a degree of leverage model: Robert De young & Karin P Roland(1999)

The article says that the commercial banks lending and deposit taking business has declined in recent years. Deregulation and new technology have eroded bank’s comparative advantages and made it easier for non bank competitors to enter these markets. In response, banks have shifted their sales mix towards noninterest income-by selling non bank fee based financial services such as mutual funds, by charging fees for services that used to be bundled together with deposit or loan products .It says that the conventional wisdom in the banking industry is that earnings from fee based products are more stable than loan based earnings and that fee based activities reduce bank risk via diversification.

References

RBI website Icfai Journal of Banking studies Sept 2008 issue pg 22-26 Ideas.repec.org

Gaurav Sharma

BBA(Finance, Gold Medal),MBA(Finance)

Tags: Banking, comparative, income, indian, Interest, sector, Study

Filed in Uncategorized with 0 Comments

18 Jan 10 Middle Income Group Affected by Price Hike in Kolkata’s Realty

The escalation in real estate values has been across all segments in Kolkata but the worst hit has been the middle income group. With a steady increase of 15-20 per cent in residential property values each year, what was available for the mid segment for Rs 8-15 lakh one year back, has climbed up to 20-25 lakh.

While the premium apartments available in the price bracket of 25-35 lakh an year back has also gone up to 45-75 lakh, the high income group is able to weather the price hike as they have high disposable income and mostly they are working couples.

According to real estate consultant Sandeep Sen of Calcutta Skyline, “In Kolkata the average demand is still in and around 20 lakh. To take an apartment of Rs 20 lakh a customer in usually gets it financed and goes for Rs 17 lakh loan which is 85 per cent of the property value now. This means he must have a salary of Rs 35,000 per month at least.

That is the issue- the hike in salaries has not been keeping pace with the hike in real estate values.” Moreover he adds that these are young buyers and the average age of home buyer has decreased to early thirties in the last 5-years only. For the young buyer, the pinch is even more as he has high aspirations of owning a home but is not able to fulfill his dream as the EMI is much more than what he can afford.

For the higher income group which is not price sensitive in Kolkata, there are at least 15 brands in the real estate industry who are catering to their exclusive demand of a lifestyle living.

The average size for a residential unit for the middle segment is around 1,000 sq ft (Rs 18-20 lakh) while for the premium segment, it is around 1,700-2,500 sq. ft available now in the bracket of 50-70 lakh.

For more details on Kolkata Properties, log on to magicbricks.com

For more information on India Properties visit magicbricks.com, here you can also know about Kolkata Real Estate Builders.

Tags: Affected, Group, Hike, income, Kolkata's, middle, price, REALTY

Filed in Uncategorized with 0 Comments

12 Jan 10 Using Web Based Help Desk Software to Boost Your Online Income

An online business that is very successful often has a growing customer base. The growth itself certainly has to be managed. Otherwise, the business may be crushed under the weight of its own growth – that is, if the business grows too fast for the entity to handle.

Fortunately, an online business is one of the few business models where almost everything can be automated with systems such as hardware and software. For example, you may want to install an billing system that is integrated with your payment processor so that all payments are automated. The billing software can then generate the appropriate reports for you and your finance department, thus saving you a lot of time and resources. Customers who pay online using your billing system will receive automated confirmations and invoices immediately upon payment. This will certainly help boost confidence, as everything is handled in a professional manner.

Billing is just one such example. The next example, is to use a web based help desk software to help handle support questions. Support can take up a large amount of time, and when the customer base is growing at an amazing rate, there has to be some system that tracks, log, and maybe even respond to the customer requests. The value of a help desk software is that it keeps all the support questions well organized. And anyone who has sent a support email will be assured that his or her questions won’t be lost. If the business loses or fails to respond to the emails in a timely manner, chances are the customers will not deal with the company ever again. Lost customers mean lost revenues. And that’s certainly not good for any business. So it’s important to learn the basics of what a help desk software can or cannot do, and pick the right system to install for your online business.

An effective help desk software can log and track all incoming support emails. These emails are treated as support tickets, and all support tickets have an ID attached to them. The help desk software will then route the tickets to the appropriate department. For instance, if it’s a billing issue, it’ll be routed to the billing department and so on. The respective departments can then respond accordingly in a timely manner. Emails will never be lost again.

These support emails are all added to a database, already installed on the web server with the help desk software. Most modern help desk software are web based. They are very easy to integrate into your, and some even come with step by step installation wizards.

But what does all that have to do with increasing revenues? Again, the presence of a professional help desk software on your website will boost the confidence of your customers. Customer retention rate is increased, and the rate of repeat purchases will increase as well, due to happy customers who have received great support. So if you’re already running a successful online business, it’s high time that you look into installing a web based help desk software to boost your income.

For more information on ASP.NET help desk or web based help desk software, please visit our resource site.

Tags: Based, boost, desk, help, income, online, Software, Using

Filed in Uncategorized with 0 Comments

10 Jan 10 Income 5X The S&P!

Do you own stock market investments that pay paltry dividends?

The dividend yield of the S&P 500 Stock Index on December 31, 2008 was 3.14%, and the average for the first eight years of this decade was 1.6%, up slightly from its all time low of 1.14% in 1999.

At the current yield (8/31/2009) of 2.1% it will take 48 years to recover your investment! And the current yield is not due to companies paying you more. In fact, many are cutting dividends. The yield has increased because of the price decline in the S&P 500 index. So, you are not getting more income from owning the S&P Index or a mutual fund that mimics the S&P Index.

However, it may surprise you to know corporate dividends have been expanding rapidly, as you will see in the schedule and graph below.

Do You Need More Income?

More income is available in many strong, creditworthy, and safe stocks & bonds. Investing in safe, high yield stocks and bonds is easy. Let me show you.

Corporate dividends are tracked by the U.S. Bureau of Economic Analysis (BEA.gov) and show a continuous and sustained increase. The following schedule compares all corporate dividends with the dividends paid by those companies in the S&P 500 Index.

The S&P 500 Stock Index, which covers about 77% of the US stock market, currently pays a dividend yield of 2.1%. In 2008, the S&P 500 Index companies paid out dividends totaling $247 billion, the same level as 2007.

Dividends Paid

Individuals received $834 billion in dividends in 2008, an increase of 6% over 2007 dividends. The S&P dividends were just 30% of the total. So, dividends are being paid and are available, but are not coming from the S&P 500 Stock Index companies.

While total S&P dividends remained the same for the last two years, total dividends paid INCREASED even in the current “deep recession”!

Is this is just a temporary event? The 20 year chart below shows this is a continuing trend. In 1988 S&P dividends were 52% of total dividends paid. This percentage has dropped steadily over the past twenty years and now stands at 30%.

While S&P dividends have increased nearly four fold over the last 20 years, total dividends paid have increased seven fold. You will note the difference has widened in the last several years.

Total dividends have grown from $130 billion in 1988 to $834 billion twenty years later, a compound growth rate of 9.7%. During the same time, S&P dividends have gone from $67 billion to $247 billion, a compound growth rate of 6.7% per year.

Except for 2008, there has been a steady decline in the S&P yield over the last twenty years. And the payout ratio of 40% in 1988 has declined to 34% last year.

The pattern is clear… this is a long term trend for steady growth in total dividends. But these dividends are not coming from the companies in the S&P 500 index. And S&P Index companies distribute a smaller portion of their profits and low dividends relative to their stock price.

So where are these High-Yield Investments?

I have shown you the absolute level of dividends and its rapid growth. These dividends come from two sources in addition to the dividends paid by the S&P 500 Index… private companies and public companies not in the S&P 500 index.

There is no information that tells us how much of the available dividends come from private companies, which is not available to us, and public companies which is.

But I can tell you there are plenty of public companies offering lush dividends. I have constructed a universe of established and creditworthy companies that pay high dividends. This universe is more than 700 companies. And when I add in the bond universe, we have an investment universe of over 1,000 companies.

Public companies are in two categories: stable companies in mature industries, and companies with special tax characteristics, such as real estate investment trusts (REITs), publicly traded partnerships (PTPs), and royalty trusts.

These two categories give us a large universe of about 700 potential investments, 200 more than contained in the S&P 500 Stock Index. In addition, I will add high yield corporate bonds to the portfolio when I feel it is appropriate.

Our universe allows me to easily build a broadly diversified and stable high income portfolio.

Live Long and Prosper,

Mike Williams, CFA

Mike Williams is a professional money manager and Chief Investment Officer for Panhandle Portfolios, Inc. He has a BBA from the University of Massachusetts, an MBA from Southern Illinois University, and has held the Chartered Financial Analyst (CFA) certification since 1990, Certificate #13376.

He has been a credit analyst, a foreign exchange exposure analyst, an international pension expert, an international equity portfolio manager, a Japanese stock analyst, and the founder and chief executive officer of several companies engaged in a variety of business ranging from commercial real estate in New England to recycling electronics in China.

Tags: income

Filed in Uncategorized with 0 Comments

08 Jan 10 Overnight Writing Income.

Hands Down The Best Guide For Beginners To Start A New Career By Writing For The Internet. No Experience Necessary – Freelance Writers Are In Demand By Website Owners To Create Contenet For Their Sites. Golden Opportunity To Learn All About This Work.

Overnight Writing Income.

Tags: income, Overnight, writing

Filed in India with 0 Comments

29 Dec 09 SHABANA BANO Versus IMRAN KHAN

Criminal…

Continue reading here:
SHABANA BANO Versus IMRAN KHAN

Tags: Code, DIVORCE, income, India, Light, muslim, source, Woman

Filed in India, Uncategorized with 0 Comments

15 Dec 09 How to Make $30,000 a year Blogging

Last night I was chatting with a blogger who was feeling completely overwhelmed with their goal of making a living from blogging.

View post:
How to Make $30,000 a year Blogging

Tags: a-little-more, a-year-sounds, amazon, break-it-down, commission, current, daily, exercise, goal, goals, income, other-affiliate, really-specific, sales, time

Filed in India with 0 Comments

27 Nov 09 What You Can Learn About Blogging Business Models from a Hip-Hop Artist Who Used to Hustle on the Corner Just to Put Food in His Daughter’s Mouth….

A Guest Post by Kelly Diels . First, Mom, I don’t even know what Mr. Smalls was selling on the corner but I’m pretty sure it is not smiled upon by the authorities and I have never ever tried it nor will I