Question

Consider the following statements:
$1$. Capital Adequacy Ratio (CAR) is the ratio of a bank's capital in relation to its risk weighed assets and current liabilities.
$2$. Tier I capital comprise of the core resources of a Bank.
$3$. Tier II capital comprises of the undisclosed resources.
Which of the given statements is/are correct?

• A. $1$ and $2$
• B. $1$ and $3$
• C. $2$ and $3$
• D. All of the above

Answer 1

The correct option is D All of the above

Capital Adequacy Ratio(CAR) is the ratio of a bank’s capital in relation to its risk weighed assets and current liabilities. It is a number indicating how much cushioning does have a bank have to overcome the risk associated with its lending.

Tier I capital comprise of the core resources of a Bank like Paid up Capital, Capital reserves, surplus arising out of sales and other intangible resources.

Tier II capital comprises of the undisclosed resources, debt capital instruments like bonds, unsecured loans and others.