Raising capital from the market will be a challenge: RBI

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Mumbai, Nov 27 (UNI) The Reserve Bank of India (RBI) today said that to raise capital from the market continuously to sustain banks operations in a fast growing economy is a bigger challenge for commercial banks in the country.

The RBI today released the report on trend and progress of banking in India, 2007, which stated that the public sector banks need to be vigilant about maintaining their profitability in the future.

The report pointed out that public sector banks interest margins have come under pressure in recent years due to the increased competition in the banking sector.

In order to maintain profitability in future, commercial banks would have to contain operating costs, apart from searching for non-interest sources of income.

The report further added that in an increasingly global and competitve financial world, a major challenge for public sector banks is to institute appropriate risk management system to manage such risks.

On the operational and performance of commercial banks in the country during the period 2006-07, the report observed that bank credit growth remained robust for the third year in succession. The deposit rate of the commercial banks accelerated due to term deposits.

The report also said that net profits of scheduled commerical banks increased on the back of rise in interest income and containment of operating expenses. Non performing assests ratio, both in gross and net basis, declined during the period.

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