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Profitability to depend on earning of non-interest income: RBI
Mumbai, Nov 17: In the face of increasing competition in the banking sector, the future profitability of public sector banks will depend on their ability to generate greater non-interest income and control operating expenses, Reserve Bank of India said today.
Mumbai, Nov 17: In the face of increasing competition in the banking sector, the future profitability of public sector banks will depend on their ability to generate greater non-interest income and control operating expenses, Reserve Bank of India said today.
"Increasing competition among banks, emanating not only from peers, but also from new entrants and other intermediaries, has been exerting pressure on bank spreads," RBI said in its "report on trend and progress of banking in
India 2002-03" released here.
The technology-intensive new private and foreign banks were positioning themselves as "one-stop shop" financial services and providing customers greater convenience and high quality services backed by appropriate investments in technology and other infrastructure, it said.
Apart from the applicability of capital adequacy standards being in force, new methods of measuring market-risk such as value-at-risk and pre-commitment approaches were expected to provide a more standardised but tighter framework for the banking sector, the apex bank said.
Simultaneously, banking industry was undergoing a change driven by technological advancements. Since retail customers were fast becoming more demanding in competitive environment, banks have to offer value-added services, it said.
"Harnessing technology to improve productivity so as to produce highly competitive types of banking and generating greater non-interest income by diversifying into non-fund based activities will be important features of indian banking of tomorrow," the bank said.
Bureau Report
The technology-intensive new private and foreign banks were positioning themselves as "one-stop shop" financial services and providing customers greater convenience and high quality services backed by appropriate investments in technology and other infrastructure, it said.
Apart from the applicability of capital adequacy standards being in force, new methods of measuring market-risk such as value-at-risk and pre-commitment approaches were expected to provide a more standardised but tighter framework for the banking sector, the apex bank said.
Simultaneously, banking industry was undergoing a change driven by technological advancements. Since retail customers were fast becoming more demanding in competitive environment, banks have to offer value-added services, it said.
"Harnessing technology to improve productivity so as to produce highly competitive types of banking and generating greater non-interest income by diversifying into non-fund based activities will be important features of indian banking of tomorrow," the bank said.
Bureau Report