BANGALORE: Banks are commercial institutions and need to increase their business. Unlike other stores and shops, banks are selling services rather than products. Learn how banks get their funds and how they make money on services.

Here we look more closely at the value chain of banking industry on how banks do business and how they earn profits. :

1. Banking Value Chain

The value chain is nothing but a model that describes how banks create value in their products and services. The banking industry “Value Chain” starts with the customer. The rest of the value chain is comprised of a series of value-generating events and activities. For their services, banks need to earn money to keep these institutions going. 

Now we know that banks are important to the efficient functioning of the financial system. Banks are generally owned by stockholders and their equity capital is constituted of individual stockholders' stake in a bank. Profit is paid out to stakeholders in the form of dividends, although the bank may keep some profit to add to its capital. Banks have traditionally made money by loaning money, earning interest on held securities, and charging fees for customer services.