BANKING AFFAIRS

Detailed explanation-1: -The tier 1 capital ratio is the ratio of a bank’s core tier 1 capital-its equity capital and disclosed reserves-to its total risk-weighted assets. Tier 1 capital is used to describe the capital adequacy of a bank and refers to its core capital, including equity capital and disclosed reserves.

Detailed explanation-2: -In India, the Reserve Bank of India (RBI) mandates the CAR for scheduled commercial banks to be 9%, and for public sector banks, the CAR to be maintained is 12%.

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 correct answer is 1 only. The Capital Adequacy Ratio (CAR) is a measurement of a bank’s available capital expressed as a percentage of a bank’s risk-weighted credit exposures.

Detailed explanation-5: -Banks calculate risk-weighted assets by multiplying the exposure amount by the relevant risk weight for the type of loan or asset. A bank repeats this calculation for all of its loans and assets, and adds them together to calculate total credit risk-weighted assets.