The Basel III norms stipulated a capital to risk weighted assets of 8%. However, as per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%.
What new ratio is included in Basel 3?
Basel III introduced the use of two liquidity ratios, including the Liquidity Coverage Ratio and the Net Stable Funding Ratio.
How do you calculate Basel capital adequacy ratio?
Basel III Capital Adequacy Ratio Minimum Requirement The capital adequacy ratio is calculated by adding tier 1 capital to tier 2 capital and dividing by risk-weighted assets.
What is the Tier 2 capital limit as per Basel 3?
However, the provisions on 'standard assets' together with other 'general provisions/ loss reserves' and 'provisions held for country exposures' will be admitted as Tier II capital up to a maximum of 1.25 per cent of the total risk-weighted assets.
What is a good capital adequacy ratio for banks?
The minimum capital adequacy ratio for banks as per Basel III norms is 8%. The CAR or the CRAR is computed by dividing the capital of the bank with aggregated risk-weighted assets for credit risk, operational risk, and market risk.