Capital Adequacy Ratio

Tax Glossary Definition

Capital Adequacy Ratio

Capital Adequacy Ratio (CAR) – The Capital Adequacy Ratio is a key regulatory measure that evaluates a bank’s capacity to meet its financial obligations by comparing its available capital with its risk-weighted assets. It acts as a safeguard, ensuring that the institution can endure potential losses while maintaining depositor confidence and overall financial stability.

Example: A bank with ₹1,000 crore in risk-weighted assets and ₹120 crore in capital would have a CAR of 12%, satisfying the minimum capital requirement set by regulators.

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