Is a high capital adequacy ratio good or bad?

High capital adequacy ratio is good because it indicates that the bank is in a better position to deal with unexpected losses due to availability of adequate capital. A bank is at a higher risk of failure when the capital adequacy ratio is lower, which indicates that regulatory authorities may have to intervene and infuse capital. You can read about the Capital Adequacy Ratio (CAR) in the given link.

Further readings:

  1. Topic-Wise GS 3 Questions for UPSC Mains
  2. Basel III Norms – Regulations by Basel Committee on Banking Supervision

Related Links

Financial Stability Report (FSR) 2020

Bad Bank – Recent Proposal by Indian Banking Association

List of Important Banking Sector Reforms & Acts

UPSC Mains General Studies Paper-III Strategy, Syllabus & Structure

Cash Reserve Ratio – Importance, Advantages & Effects

Non Performing Assets (NPA) – Facts for UPSC GS-III

Leave a Comment

Your Mobile number and Email id will not be published. Required fields are marked *