Banks make money by borrowing and lending is a more accurate and simplistic answer. This video which was supposed to be a more detailed account of the workings of banks is half baked, wayward and misleading, while ignoring the basic concepts of bank capitalization, net interest margin etc. Money working multiple times for HDFC made me scratch my head. I would encourage you to better prepare when you have the voice to influence and educate thousands of people.
You are right. The video is good but it should be clarified that only one of the main aspect of how how banks make money is explained in this video. It is still a useful video for me.
as a supply chain professional, I'd like to substitute "ecosystem" with "supply chain" - also a new buzzword for many these days :). If banks control entire supply chain, with other factors such as due diligence and low NPA of course, that makes them at a position of competitive advantage :)
Sir is there any source where we can get to know about it in detail? Because I want to know what % of their loans have these ecosystem in place as this seems to have many variables in it. P.S- Really liked the video. Learnt an entirely new way in which HDFC is operating. 🙌
What you're missing in this video is that banks make a LOT more money by selling ancillary and 3P products like insurances. ~20% of profits of new insurance companies are paid out to banks. Given banks have no investment in these products that income is mostly pure profits. Otherwise NII doesn't really add up to bank profits a great deal because interest rates are centrally governed and other than sales push, there isn't much to differentiate one bank from the other
really good. I only have one point to add. You should not only have a good collection system but also a good credit appraisal system to perform better in times of recession. wonderful effort. all the best.- a retired banker and a life time learner.
well explained, Bank earn money by circulating same money again and again in economy. for every 100 rupees it make virtual currency of 1000 rupees. otherwise bank can't survive only on profit of borrowing and lending money.
Pardon for silly question : Why would the Maruti not pay directly to HDFC or the Dealer? You were trying to make some point about it I think but I couldn't really grasp it. Also the ₹10k each will come back more than ₹10k I suppose because of interest paid by each of the 4 entities? What other sources of income you were mentioning on those ₹40k? The same ₹40k is doing a lot of income I suppose.
Hi Piyush, Yes - the 10K will come back as 10k+Interest. Now, that (10k+ interest) can be once again given out as loan and hence additional income. Hope this makes sense. Maruti does pay HDFC w.r.t. the dues it owes. Similarly it has to pay the supplier as well. Not sure if I get your question completely!
Even in the company that I work in (Bajaj Finance) the moat is collections team only. No doubt we work on other functions as well, but the business owners have confidence that the money will come back. However, strong collection teams sometimes have their concerns which a customer might not like. So we need to find that thin line between business and customer emotions as well.
Finally, bank are making money by lending money. When you put money in the market it multiplies. That's why government encourage spending and saving both. Collection and credit comes in picture only when bank agress to lend money.
You should make a Video on how the financial ecosystem crumbles due to NPA growth or coz of wilful defaulters ... As far as I know this is the only reason stopping India from growing to the next level.....
@pavan - I am interested in doing some number crunching of India’s top banks. Do we have a public dataset available like kaggle to get this data ? Just wanted to check with you….
Banks make money by borrowing and lending is a more accurate and simplistic answer. This video which was supposed to be a more detailed account of the workings of banks is half baked, wayward and misleading, while ignoring the basic concepts of bank capitalization, net interest margin etc. Money working multiple times for HDFC made me scratch my head. I would encourage you to better prepare when you have the voice to influence and educate thousands of people.
You are right. The video is good but it should be clarified that only one of the main aspect of how how banks make money is explained in this video.
It is still a useful video for me.
Agreed!
Informative video sir 👌
Not detailed vdo, disappointed
as a supply chain professional, I'd like to substitute "ecosystem" with "supply chain" - also a new buzzword for many these days :). If banks control entire supply chain, with other factors such as due diligence and low NPA of course, that makes them at a position of competitive advantage :)
Agree!
Sir is there any source where we can get to know about it in detail? Because I want to know what % of their loans have these ecosystem in place as this seems to have many variables in it.
P.S- Really liked the video. Learnt an entirely new way in which HDFC is operating. 🙌
as MBA interviews are around the corner we want more of such videos on businesses
Another finfluencer about to get his ass whooped for presenting half baked and low tier info.
You can't speak half decent language in a public platform. Show it to your family and then let them decide what to do for your comment
Fractional reserve banking
What you're missing in this video is that banks make a LOT more money by selling ancillary and 3P products like insurances. ~20% of profits of new insurance companies are paid out to banks. Given banks have no investment in these products that income is mostly pure profits. Otherwise NII doesn't really add up to bank profits a great deal because interest rates are centrally governed and other than sales push, there isn't much to differentiate one bank from the other
really good. I only have one point to add. You should not only have a good collection system but also a good credit appraisal system to perform better in times of recession. wonderful effort. all the best.- a retired banker and a life time learner.
well explained, Bank earn money by circulating same money again and again in economy. for every 100 rupees it make virtual currency of 1000 rupees. otherwise bank can't survive only on profit of borrowing and lending money.
Bad video. Not impressed. Hdfc bank being the best bank in india is nothing but a pure myth.
Pardon for silly question : Why would the Maruti not pay directly to HDFC or the Dealer? You were trying to make some point about it I think but I couldn't really grasp it.
Also the ₹10k each will come back more than ₹10k I suppose because of interest paid by each of the 4 entities?
What other sources of income you were mentioning on those ₹40k?
The same ₹40k is doing a lot of income I suppose.
Hi Piyush,
Yes - the 10K will come back as 10k+Interest.
Now, that (10k+ interest) can be once again given out as loan and hence additional income.
Hope this makes sense.
Maruti does pay HDFC w.r.t. the dues it owes. Similarly it has to pay the supplier as well. Not sure if I get your question completely!
Could you please also make a video on investment banks like jp morgan, Goldman Sachs like how they earn and manage funds
Could you provide some sources and tips on researching business strategies?
The primary source is quarterly results documents published on the company's website. And also, their conference call. Both of them are pure gold!
Even in the company that I work in (Bajaj Finance) the moat is collections team only. No doubt we work on other functions as well, but the business owners have confidence that the money will come back. However, strong collection teams sometimes have their concerns which a customer might not like. So we need to find that thin line between business and customer emotions as well.
sir need more explaination didn't understood properly that ecosystem part...
Finally, bank are making money by lending money. When you put money in the market it multiplies. That's why government encourage spending and saving both. Collection and credit comes in picture only when bank agress to lend money.
Banks make money from saving accounts
You should make a Video on how the financial ecosystem crumbles due to NPA growth or coz of wilful defaulters ... As far as I know this is the only reason stopping India from growing to the next level.....
sir, if collecting the money back plays a crucial role ,then why dont the remaining banks focus on this aspect? is it that tough?
Pavan garu If possible we need this content in Telugu
Thanks for the knowledge sir
Sir
You are mistaken. The reason is future growth
The IDFC FIRST BANK is better.
quite informative video
still looking for the other ways banks make money apart from lending 😜
This confused me more now
@pavan - I am interested in doing some number crunching of India’s top banks. Do we have a public dataset available like kaggle to get this data ? Just wanted to check with you….
I am not sure. I usually get numbers directly from banks P&L statements
Thank you Pavan for making these concept even more easier to understand.
You're most welcome
What if the loans are ammortized?
Very helpful. Thank you Sir for information 😊🙏
Thank you for this valuable information.
Indian Accent bro
Well done!! Supa dupa insightful
Insightful information. Thanks sir
HDFC ka dalal😂