Banks’ share of treasury gains in other income climbs to highest in four years

Banks

The share of private and state-owned banks' treasury gains in their total “other income” surged to its highest in the past four years in the April-June period, a Motilal Oswal Financial Services report has said, helped by .

The mix of treasury gains in the "total other income" increased to 22-40 percent for state-owned banks and 5-30 percent for private banks.

The gains were driven by the sharp moderation in yield on governments securities following 100 basis points (bps) cut in repo rates by the Reserve Bank of India (RBI).

Among state-owned lenders, State Bank of India, Bank of Baroda and Canara reported the highest treasury gains, accounting for 31-40 percent of their other income. For private lenders HDFC Bank and ICICI Bank, treasury gains accounted for 5-15 percent of total other income in Q1FY26, the report said.

Other income are earnings that are not generated from banks’ primary, interest-based lending activities. Also known as "non-interest income" or "fee income", other income is a vital component of a bank's revenue.

In Q1FY26, the RBI reduced repo rate by 75 bps, with a 25 bps cut in April and 50 bps in June. In response to the cut, yields on the government securities dropped by only 20 bps.

Before the April cut, yield on the 10-year government bond was trading at 6.484 percent, which eased to 6.288 percent after the June reduction. Sale of securities to the RBI in the open market operations (OMO) auctions also helped banks to gain some profits, banking analysts said.

Since the start of the calendar year, the RBI purchased Rs 4.84 lakh crore worth of government securities from banks under OMO auctions.

Experts said state-owned banks, which were the major participants in the OMO auctions, are expected to gain the most in terms of treasury income.

Yield on government securities also fell due to surplus liquidity due to continuous support by the RBI through OMOs and USD/INR Buy/Sell swap auctions. Securities’ redemption, coupon payments and month-end government spending towards salaries and pensions, too, helped.

Through USD/INR Buy/Sell swap auction, the central bank injected $25.2 billion into the banking system.

Treasury gains are expected to moderate in the coming quarters, as bond yields decline in a more calibrated manner, while healthy systemic liquidity and upcoming CRR cut implementation will obviate the need for repeated OMOs, the report said.

Though a benign inflation print, supported by stable currency movements, leaves room for further rate cuts by the RBI, which will drive up treasury gains, the report added.