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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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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