Indian banks will need to tap overseas markets for capital

Indian banks will need to tap overseas markets for capital

Mumbai: Indian banks will have to tap global markets to face the challenge of rising capital requirements, besides managing liquidity effectively to meet long-term funding requirements, Reserve Bank of India (RBI) deputy governor K.C. Chakrabarty said on Tuesday.

“Not only the increased capital, the cost of capital is also going to increase. How banks are going face is this is a challenge," Chakrabarty said at the Mint Annual Banking Conclave in Mumbai on Tuesday.

Chakrabarty also stressed that management of liquidity is set to become a key issue for banks to finance long-term funding requirements..

“Banks usually borrow at very short and lend long-term. Banks have to raise different type of long-term resources to meet the liquidity requirement. More funds have to be raised by the banks," Chakrabarty said.

RBI is currently in the process of formulating guidelines on anti-money laundering that will deal with issues like tax avoidance and cross-border capital flows, he said.

Noting that central banks globally are facing various challenges in the current uncertain global environment to safeguard their respective economies, Chakrabarty said apex banks can operate more effectively when insulated from external interference.

Also, in the face of increasing interference among global financial financial markets, banks are more “susceptible" to development in financial markets, Chakrabarty said.

It is not possible to achieve financial stability without achieving financial inclusion or giving access to the poor to basic banking services, Chakrabarty said, adding that banks have to utilize technology in a cost-effective way to achieve this goal.

“Using technology for reducing the cost of transactions and improve reporting standards is going to another challenge for banks," Chakrabarty said.

Further, the implementation of International Financial Reporting Standards or IFRS is also crucial for the Indian banking system in view of the increasing integration of global markets, Chakrabarty said.