Page 42 - Banking Finance September 2023

ARTICLE

CAPITAL

MANAGEMENT

IN INDIAN

BANKS

Introduction important activities for a bank. Management of capital
starts with the inception of the new financial year and the
In Banking sector, Capital is very important as it provides a
most important step in this process is to understand the
layer of protection to the bank from unexpected risk and
needs of the business. We have shown the various steps
losses. In addition to this it also comforts depositors and the
involved in the management of capital.
creditors that their deposits or lending are safe, Bank is
having enough capacity to repay the liabilities.
It is extremely important for a financial institution to
calculate the capital adequacy ratio and secure sufficient
Capital Management capital to cover risks.
Capital is the core strength of any bank. It provides banks
with a cushion against unexpected future losses. Bank needs Capital is scarce for banks due to availability of limited
to manage the capital as it is very scarce and imperative resources. Hence, it should be ensured that the bank is
for its growth. making every effort to conserve the capital through its
management.
Management of capital is one of the most critically
Importance of Capital Management
About the author Like every other organization or entity, banks also need
funds to not only survive but to sustain themselves in the
market. Unavailability of funds will hamper their prospect
Puneet Kumar
of growth, innovation, and commitment towards growth of
Senior Manager (Research)
economy. As a result, banks are always under constant
Union bank of India
pressure from investors and regulators to secure more
Union Learning Academy, Gurugram
capital.
42 | 2023 | SEPTEMBER | BANKING FINANCE