Globalization, rising competition, strict global regulations, emerging new risks, declining interest margins, etc., are squeezing the profitability of Indian banks. In such a scenario, challenge before banks is not only to face new risks and tackle them effectively, but remain profitable also.

There have been divergences among economists about the concept of profit. This is the residual surplus for the entrepreneur after distribution of shares to other factors of production. Some held that the profit is reward for organizing and coordinating the other factors of production. Some others have described it as a reward for the ultimate risk bearing and decision-making. Schumpeter claims profit as a reward for innovative role of the entrepreneur. F H Knight emphasizes that the uncertainties in the economy generate profit and it is a reward for bearing the risk of uncertainty by the entrepreneur. John Maynard Keynes views profit as a result of favorable movement of general price level and can be termed as a nonfunctional income. J B Clark treats profit as a dynamic surplus. However, such types of definitions are endless.

Economic viability is of prime importance for survival of any type of business activity. Entities susceptible to losses eat away the capital invested and may be economically unviable. Hence, business enterprise hovers around profit, which is the internal accrual and increases value of capital invested. Profitability has been a crucial index of operational efficiency. Higher profit level indicates strength and efficiency of the organization.

Indian banking is a special structure where major banks were nationalized and brought under the control of the state in 1969. While 90% of business is lying with state owned banks, the miniscule 10% is being with private banks which include the old generation banks and the New Generation Banks as well. The New Generation Banks are showing better performances since their inception and constantly increasing their market share.

Professional Banker Magazine, Profitability, Globalization, Indian Banks, Decision-Making Process, Business Enterprises, Banking Sectors, Banking Industry, Public Sector Banks, Non-Performing Assets, NPAs, Risk Management, Private Sector Banks, Asset Liability Management, Assets Reconstruction Fund.