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Q.

What do you mean by Capital Adequacy Norms?

Tags: sex, norms, adequacy
Asked by sasi, 26 Aug '11 12:38 pm
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Answers (2)

1.

Bank capital plays a very important role in the safety and soundness of individual banks and the banking system.Basel Committee for Bank Supervision (BCBS) has prescribed a set of norms for the capital requirement for the banks in 1988 known as Basel Accord I.These norms ensure that capital should be adequate to absorb unexpected losses or risks involved.If there is higher risk,then it would be needed to backed up with Capital and Vice versa.All the countries establish their own guidelines for risk based capital framework known as Capital Adequacy Norms. Capital Adequacy measures the strength of the bank.Capital Adequacy Ratio is also known as Capital Risk Weighted Assets Ratio.
Source: CAR//
Answered by LIPSIKA, 26 Aug '11 12:50 pm

 
  
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2.

Capital Adequacy Ratio (CAR) is defined as the ratio of bank's capital to its risk assets. Capital Adequacy Ratio (CAR) is also known as Capital to Risk (Weighted) Assets Ratio (CRAR).. Government of India (GOI) appointed the Narasimham Committee in 1991 to suggest reforms in the financial sector. In the year 1992-93 the Narasimhan Committee submitted its first report and recommended that all the banks are required to have a minimum capital of 8% to the risk weighted assets of the banks. The ratio is known as Capital to Risk Assets Ratio (CRAR). All the 27 Public Sector Banks in India (except UCO and Indian Bank) had achieved the Capital Adequacy Norm of 8% by March 1997.
The Second Report of Narasimham Committee was submitted in the year 1998-99. It recommended that the CRAR to be raised to 10% in a phased manner. It recommended an intermediate minimum target of 9% to be achieved by the year 2000 and 10% by 2002.
Answered by venkatesaldevarajan, 26 Aug '11 12:40 pm

 
  
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