Know what is Capital Adequacy Ratio, understand its importance

Capital Adequacy Ratio is the ratio of the available capital and risk of a bank.

Capital Adequacy Ratio is the ratio of the available capital and risk of a bank. It is also called Capital to Risk (Weighted) Assets Ratio or CRAR.

capital adequacy ratio (Capital Adequacy Ratio) any one bank ,Bank, available capital of (Capital) (capital) and risk ratio. It is also called Capital to Risk (Weighted) Assets Ratio or CRAR. In other words, it is the ratio of the risk-weighted assets of the bank to the current liabilities. Guru also states that this ratio can be used for depositors. (Depositors) and it promotes the stability, efficiency of the financial system. Now let us also learn to calculate it. To calculate this, Tier-1 and Tier-2 capital are added and divided by risk-weighted assets.

CAR = (Tier-1 + Tier-2 Capital)/risk weighted assets (RWA)


CAR = Total Capital / RWA

Shows the ability of banks to deal with risk

Guru says that a bank with a high CAR is considered to be above the minimum requirements required to be declared insolvent. Therefore, the higher the CAR of a bank, the more capable the bank will be to face financial meltdown or other losses. Guru also says that this ratio also prepares banks to deal with credit and operational risk.

The purpose of this ratio is to establish that a single bank has enough capital to meet the loss of a certain amount even before the situation of bankruptcy occurs. Suppose this ratio also shows the ability of any one bank to bear the loss. The Reserve Bank or RBI fixes the CAR rate to prevent banks from taking additional loans and going bankrupt in the process.

Apart from this, let us tell you that the Reserve Bank of India has implemented the system of Banking Ombudsman or Banking Ombudsman for the settlement of complaints related to banking services. At present, there are 12 Banking Ombudsmen in the country whose offices have been set up in the capitals of different states. Many problems like non-delivery or delay in payment of cheques, drafts, bills etc., non-payment or delay in collection of cheques, drafts, bills, etc. in banks, refusal of banks to open deposit accounts without any valid reason. People can approach the Banking Ombudsman with a complaint of Rs.

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