Interest earned by a depositor against a deposit with a commercial bank for custodial service :
is a fund based income
Bank-related income is classified as fund based when it arises from deploying or placing funds (interest on deposits, loans and advances), and fee based when it is a charge for a service rendered (commission, brokerage, locker or custodial fees).
When a depositor places money with a commercial bank, the deposit is the depositor's own fund lying with the bank, and the bank pays interest for the use of that money.
The interest the depositor earns therefore arises from the funds placed, not from any fee charged for a service, and no commitment (undrawn facility) is involved.
So the interest earned by the depositor is a fund based income.
Hence, the answer is is a fund based income.
Similar Questions
Match the items of List - I with List - II in terms of functions of a bank :
List - I List - II (Activities) (Functions) (a) Underwriting (i) Primary Functions (b) Transfer of funds (ii) Granting Advances (c) Overdraft (iii) Utility Functions (d) Recurring Deposits (iv) Agency Functions Codes :
(a) (b) (c) (d)
Assertion (A) : Taking of deposits and granting of loans single out banks.
Reasoning (R) : Banks act as intermediaries when they mobilize savings from surplus units to shortage units in order to finance productive activities.
Codes :
The profitability of public-sector banks is low due to
(i) Over-cautions approach to lending
(ii) Reserve Bank Policies
(iii) High Overhead Costs
(iv) Social-sector lending
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Codes :
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According to the FDI Policy of the Government of India (2012), the FDI in banks is limited to
Match the items of List – I with List – II :
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a b c d
Select the major principles which banks strive to incorporate in their working from the following :
(a) Profitability
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Important Questions from Commercial Banks
Which of the following banks is the largest commercial bank in India?
Which one of the following is a primary function of commercial banks?
Which of the following is/are function(s) of a commercial bank?
- Accepting deposits
- Giving loans
- Payments and settlements
Imposition of price _______ below the equilibrium price leads to excess _______.
- Which of the following are liabilities of commercial banks ?
I. Capital and reserves
II. Cash and balances with RBI
III. Investments
IV. Borrowings
Codes :
