Why and How do Banks Raise Capital?

“How do banks raise capital” is a question that is best understood by looking at the basics of a bank. Just as a business sells its products or services as its main line of business and thus its survival; a bank has the business of lending and recovering from customers at the core of its raison d’ etre. To make the question of how do banks raise capital easier, let us think of money as the raw material for a bank’s business. If a manufacturing firm such as textile business has to assemble raw materials that start with cotton, a bank has only money that it plans to lend to its customers as its raw material.

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13 Answers
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  • Bank raise their capital by lending money and by investing their money in the world Bank
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  • Money as you say is just a part, but come to think of all other services that accompany the trust of money to people... - Visa Cards,Master cards etc. - Back to school support - Overdraft (which stands as one of the highest income generating method of most banks especially Micro finances....since is a monthly pay back package with high interest rate. - Loans in general is a long term process and majority of backs a suffering from deviation and devaluation of currency.....which pushes them to reduce interest rate while over extending the term of pay. But I must say Banks 2%,1% and 0% interest rate thus apply to European countries while the entire West, central African is a base for higher interest rate 3%,4% mostly.(We all know why this happens ) Hope you enjoy this.
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  • The money that a bank raises to lend is often called Capital. Basically, raising capital is one of the basic and important functions of the bank.Bank raises capital through various financial investments and by providing loans, savings, deposits, credits and other financial techniques it provides for different kinds of customers. whenever, one needs to get a loan or deposit money, the first source comes in mind is Bank. So, the bank raises capital for the purpose of providing ease to operations of  banking functions or can be putted as reason to suntain, for the stake holders and customers of the bank, as they act as the lending source of capital for government and the comman people.

    Hope u enjoyed this and find it relevant.
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  • Bank raise capital for upliftment, development, and growth. Without raise capital bank can't survive. Bank investment share market and make profit. They provides cash big investors and receive returns on them.
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  • 1000000
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  • As the bank is providing the money for customer to spend, there is risk involved, such as; if the customer does not pay the bank. Therefore, banks charge a huge amount of interest on credit limits used. Apart for loans and deposits, banks raise capital through investments and securities.
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  • ACCOUNTS, FUNDS TRANSFER TO ALL BANKS, TDS WORKS AND OTHER WORKS ALONG WITH ADMINISTRATION AND HR WORKS
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  • its just business mediator between company and share holders
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  • Bank may raise their capital with the help of the rotation of the public money. If public only can deposit their money for their saving purposes but in that the banker may use that money as a rotation and they offered as loan with the help of the interest the banker may raise their capital in that they gave some interest to the public whatever they deposit. In deposit we have some types to deposit in the bank like it may be current , saving or recurring deposit account in that people may thought if it's a saving means whatever they deposit will be return back to them with some how interest. Some time if bank may give rotation their money to RBI also in that time they may fix some interest to their RBI like that the banker may raise their capital and that may attain their profit too.
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  • THE MONEY CAN BE RAISED FROM SHARE MARKET THROUGH DEBENTORS AND OTHER METHODS LIKE LONG TERM INVESTMENTS. COLLECTION OF PENDING INTEREST ON LOANS  THEREAFTER AND INVEST IN LOANS ETC.                        CHARON PAL SINGH
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  • Banks raise their capital from deposit s only like term and savings accounts and current accounts
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  • why means to increase the lending power and credit potentiality of the bank and provide better service to their customers, you ased how?? the answer is " bank raise capital though liablity products like insurence,mutual funds,tbills,fd's,rd's,pention schemes,bonds and so on.
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  • The banka raise its capital through deposits and FD's
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