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CRAR or CAR (Capital adequacy ratio) is used to assess the ability of a bank to absorb losses.

The minimum capital ratios are viewed by the banks as the acceptable standards to ensure the condition is fundamentally sound. 

Maturing assets and liabilities are classified based on the residual maturity (i.e. the remaining period) and not on their contractual maturity, under various time frames also termed as time buckets (1 day; 2-7 days; 

8-14 days; 15-28 days; 29 days-3 months; 3-6 months; 6 months-1 Year; 1-3 Years; 3-5 Years; 5 Years & above).

Another bucket is known as ‘non-sensitive’ wherein all assets and liabilities that are not sensitive to interest rates are classified e.g Cash, CA balance with other banks, FA, Capital, R&S, etc. 

Assets of the bank are in the form of:

Liabilities of the bank are in the form of:

Minimum Capital Requirement - Maintenance of capital concerning the risk-weighted assets.

CAR= Tier 1 Capital + Tier 2 Capital /(divided by) Risk-Weighted Assets   

The other ratios that are computed are:

Components of Common Equity Tier 1 Capital:

Components of Additional Tier I Capital

Components of Tier II Capital

Risk-Weighted Assets:

FB (On-Balance sheet) items: Assets such as cash, loans, investments, and other assets, to which the degree of risk expressed as %age weights.

NFB (Off-Balance Sheet) items: Such items are first multiplied by the credit conversion factor and then again multiplied by the relevant risk weightage to calculate the risk value.

Basel recognized securities which are considered for risk mitigation are:

[details] =>

CRAR or CAR (Capital adequacy ratio) is used to assess the ability of a bank to absorb losses.

The minimum capital ratios are viewed by the banks as the acceptable standards to ensure the condition is fundamentally sound. 

Maturing assets and liabilities are classified based on the residual maturity (i.e. the remaining period) and not on their contractual maturity, under various time frames also termed as time buckets (1 day; 2-7 days; 

8-14 days; 15-28 days; 29 days-3 months; 3-6 months; 6 months-1 Year; 1-3 Years; 3-5 Years; 5 Years & above).

Another bucket is known as ‘non-sensitive’ wherein all assets and liabilities that are not sensitive to interest rates are classified e.g Cash, CA balance with other banks, FA, Capital, R&S, etc. 

Assets of the bank are in the form of:

Liabilities of the bank are in the form of:

Minimum Capital Requirement - Maintenance of capital concerning the risk-weighted assets.

CAR= Tier 1 Capital + Tier 2 Capital /(divided by) Risk-Weighted Assets   

The other ratios that are computed are:

Components of Common Equity Tier 1 Capital:

Components of Additional Tier I Capital

Components of Tier II Capital

Risk-Weighted Assets:

FB (On-Balance sheet) items: Assets such as cash, loans, investments, and other assets, to which the degree of risk expressed as %age weights.

NFB (Off-Balance Sheet) items: Such items are first multiplied by the credit conversion factor and then again multiplied by the relevant risk weightage to calculate the risk value.

Basel recognized securities which are considered for risk mitigation are:

[5] => 1595210634.jpg [photo] => 1595210634.jpg [6] => CRAR [photo_alt] => CRAR [7] => 2020-07-20 03:03:54 [entry_time] => 2020-07-20 03:03:54 )