Banking Products & Services Explained
After understanding The Indian Banking System Explained, the next interview question is how banks actually make money through their products and services. Banking products are best viewed as a balance-sheet and revenue-model map: deposits reduce funding cost, loans earn spreads, and treasury, trade, and wealth products add fee and market-linked income. This matters in interviews because it helps you move beyond product names and explain profitability drivers using Indian examples.
- Deposits are liability products: Current Account (0% interest), Savings Account (~3.5-4%), Fixed Deposit (6.5-7.5%), NRI deposits (FCNR, NRE, NRO).
- Low-cost deposits (CASA) are a key profit driver. Each 1% CASA saves ~15-20 bps in funding cost.
- Retail Loans are asset products such as Home Loans (8.5-9.5%), Auto Loans, Personal Loans, Credit Cards, Education Loans, and Agri loans.
- Retail loans typically earn a 3-4% spread over cost of funds, with credit risk embedded.
- Corporate & SME Loans earn 1.5-3% spread for large corporates and 3-5% for SMEs, with fee income from LC/BG.
- Treasury & Investments generate mark-to-market gains/losses, coupon income, and trading profits.
- Trade Finance and Bancassurance & Wealth add fee-based income and commission income, boosting non-interest income (NII).
Banking Products as a Balance-Sheet and Revenue-Model Map
Banking products can be grouped by product category, key products, revenue or return model, and Indian examples. The big picture is simple: liability products reduce funding cost, asset products earn spreads, and treasury, trade finance, bancassurance, and wealth products add market-linked income or fee income.
CASA = Current Account + Savings Account. Low-cost deposits; key for bank profitability.
Deposits: Liability Products and Funding Cost
Deposits are liability products for a bank. Key products include Current Account (0% interest), Savings Account (~3.5-4%), Fixed Deposit (6.5-7.5%), and NRI deposits (FCNR, NRE, NRO).
The revenue or return model is driven by low-cost deposits (CASA). Low-cost deposits (CASA) = key profit driver. Each 1% CASA saves ~15-20 bps in funding cost. Indian examples include HDFC Bank CASA ratio 38%, Kotak Bank CASA ~50%, and SBI CASA ~45%.
Retail Loans: Asset Products and Spreads
Retail Loans are asset products. Key products include Home Loans (8.5-9.5%), Auto Loans, Personal Loans, Credit Cards, Education Loans, and Agri loans.
The revenue or return model is spread over cost of funds, with credit risk embedded. Retail loans typically 3-4% spread. Indian examples include HDFC Bank retail loan book ₹12+ Lakh Cr and SBI home loans market leader with ~25% share.
Corporate & SME Loans: Spreads and Fee Income
Corporate & SME Loans include Working Capital (CC/OD), Term Loans, Project Finance, Buyer Credit, and Letter of Credit. The revenue or return model is 1.5-3% spread for large corporates, 3-5% for SMEs, and fee income from LC/BG.
Indian examples include SBI as top corporate lender and Axis Bank's corporate banking at 40% of loan book. In an interview, this category is useful because it combines funded lending with fee income from LC/BG.
Treasury & Investments: Market-Linked Income
Treasury & Investments include G-Sec portfolio (SLR requirement), proprietary trading, FOREX dealing, and derivatives. The revenue or return model includes mark-to-market gains/losses, coupon income, and trading profits.
SBI treasury income contributes 10-15% of total income and is key during rate cycles. This is the part of the product map where income depends on market-linked outcomes as well as coupon income and trading profits.
Trade Finance: Fee-Based Income and Funded Exposure
Trade Finance products include Letters of Credit (LC), Bank Guarantees (BG), Export Credit, PCFC, and Documentary Collections. The revenue or return model is fee-based (0.1-0.5% of transaction value) plus funded exposure.
Kotak Mahindra Bank and HDFC Bank are strong in trade finance for import/export companies. This category is important because it shows how banks earn from transaction-linked services, not only from traditional loans.
Bancassurance & Wealth: Commission and Fee Income
Bancassurance & Wealth means selling insurance, mutual funds, PMS products through bank branches. The revenue or return model is commission income 3-8% of premium, and fee income boosts non-interest income (NII).
Indian examples include SBI Life, SBI's insurance JV, and Axis Bank selling Max Life products. This category shows how a bank branch network can distribute financial products beyond deposits and loans.
Structuring a Banking Products & Services Explained Interview Answer
"Explain the major banking products and how banks earn from each of them."
The strongest answers do not list products randomly. They connect each product category to the bank's funding cost, lending spread, fee income, commission income, or market-linked income.
The most frequent error is treating banking products as a catalogue instead of a revenue model. That costs points because it misses the link between CASA, spreads, treasury income, trade finance fees, and bancassurance commissions.
Conclusion
Banking products become easier to explain when mapped to the balance sheet and revenue model: deposits lower funding cost, loans earn spreads, and treasury, trade finance, bancassurance, and wealth products add fee or market-linked income. For interviews, anchor the answer with Indian examples and always connect the product to how the bank earns from it.