Glossary:


Term - C : Capital Adequacy Ratio

Capital Adequacy Ratio


Capital Adequacy Ratio (CAR)

Banks are required to maintain adequate capital (owners' money) to ensure that losses on their loans and investment are absorbed by the capital and depositors' money is unaffected. Depending on the risk level, loans and investments are given a weight. The ratio of the bank's capital to the sum of such risk weighted assets is the capital adequacy ratio (CAR) or Capital to Risk (weighted) Assets Ratio (CRAR)
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