An analytical study on the factors affecting the sales of third party financial products by select commercial banks in india

Abstract

The banking industry serves as a fundamental component of global economic infrastructure, facilitating financial intermediation, credit allocation, and economic growth. The study delves into the dynamic landscape of commercial banking in India against the backdrop of significant technological advancements and evolving regulatory frameworks. Amidst many advancements, the banking sector in India faces formidable challenges. The onset of the COVID-19 pandemic exacerbated existing issues such as Non-Performing Assets (NPAs), posing significant challenges to financial stability and profitability. As a remedy to mitigate various challenges, commercial banks diversify their revenue streams, and one effective strategy is the sale of third-party financial products. These products, ranging from bancassurance and mutual funds to government services, not only expand banks service offerings but also deepen customer relationships and enhance revenue generation capabilities. newlineBy selling third-party products, banks can generate fee-based income, which significantly contributes to their overall revenue and financial performance. This diversification of income streams is particularly beneficial in managing Non-Performing Assets (NPAs). Additionally, revenue from third-party products eliminates the need for default risk provisions, freeing up capital for other revenue-generating endeavors. Another advantage is that it strengthens customer relationships and retention by offering comprehensive financial services, and fostering loyalty and trust. Furthermore, the flexibility provided by this additional income allows banks to invest in digital banking innovations and sustainable practices, further enhancing customer satisfaction and competitive positioning in the market.