The paper seeks to identify the factors influencing off-balance sheet (OBS) activities of public sector banks in India. Using pooled data analysis for the period 1995-96 to 1999-2000, the analysis reveals that (i) size plays an important role in influencing OBS activities, and (ii) higher the levels of capital and liquid assets, lower the incentive of the banks to engage in OBS activities. This is in consonance with hedging theory, which contends that the aversion to risk might be an important determinant for banks not actively engaging in OBS activities.