Question
According to RBI guidelines (aligned with Basel norms),
what is the minimum Capital to Risk-Weighted Assets Ratio (CRAR or CAR) that scheduled commercial banks in India are required to maintain?Solution
• The Capital Adequacy Ratio (CAR), also known as the Capital to Risk-Weighted Assets Ratio (CRAR), measures a bank’s capital in relation to its risk-weighted credit exposures. • Under Basel II/III norms, the international minimum requirement is 8%. • However, the RBI has prescribed a stricter requirement of 9% for scheduled commercial banks in India to provide an additional safety buffer. • For NBFCs, the requirement is even higher at 15%. Thus, in India, scheduled commercial banks must maintain a minimum CAR of 9%.
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