BANKING AFFAIRS

Detailed explanation-1: -Capital Adequacy Ratio (CAR), also called Capital to Risk (Weighted) Asset Ratio (CRAR) is a ratio of Bank’s capital to its risk. Capital Adequacy Ratios are a measure of the amount of Bank’s core capital expressed as a percentage of its risk-weighted asset.

Detailed explanation-2: -It is also known as the Capital to Risk (Weighted) Assets Ratio (CRAR). In other words, it is the ratio of a bank’s capital to its risk-weighted assets and current liabilities. This ratio is utilized to secure depositors and boost the efficiency and stability of financial systems all over the world.

Detailed explanation-3: -The capital-to-risk weighted assets ratio, also known as the capital adequacy ratio, is one of the most important financial ratios used by investors and analysts. The ratio measures a bank’s financial stability by measuring its available capital as a percentage of its risk-weighted credit exposure.

Detailed explanation-4: -The capital adequacy ratio is calculated by dividing a bank’s capital by its risk-weighted assets.

Detailed explanation-5: -What Are Risk-Weighted Assets? Risk-weighted assets are used to determine the minimum amount of capital a bank must hold in relation to the risk profile of its lending activities and other assets. This is done in order to reduce the risk of insolvency and protect depositors.