What is Capital Adequacy Ratio for banks?
Capital Adequacy Ratio (CAR), also known as Capital to Risk Weighted Assets Ratio (CRAR), is the measure of a bank's capital and is expressed as a percentage of a bank's risk weighted credit exposures.
CAR = Total Capital
Total Risk weighted assets
Total capital comprises of the bank's Tier I and Tier II capital
Total risk weighted assets takes into account credit risk, market risk and operational risk.
Currently, RBI mandates minimum CRAR of 9%, but the Government of India has mandated total CRAR of 12%, with 8% Tier I capital.
Capital Adequacy Ratio (CAR), also known as Capital to Risk Weighted Assets Ratio (CRAR), is the measure of a bank's capital and is expressed as a percentage of a bank's risk weighted credit exposures.
CAR = Total Capital
Total Risk weighted assets
Total capital comprises of the bank's Tier I and Tier II capital
Total risk weighted assets takes into account credit risk, market risk and operational risk.
Currently, RBI mandates minimum CRAR of 9%, but the Government of India has mandated total CRAR of 12%, with 8% Tier I capital.
