Q. With reference to Capital Adequacy Ratio, which of the following statements is/are correct?
Select the correct answer using the code given below:
Explanation:
Statement 1 is correct. Capital Adequacy Ratio is the ratio of a bank’s capital to its risk. The CAR or the CRAR is computed by dividing the capital of the bank with aggregated risk-weighted assets for credit risk, operational risk, and market risk. Hence, a high CAR helps in better crisis management.
Statement 2 is incorrect. In India, the Reserve Bank of India mandates the CAR for scheduled commercial banks to be 9%. The CAR for public sector banks is 12%.