GyanGramConsider the following statements: 1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain…
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Consider the following statements:
1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.
2. CAR is decided by each individual bank.
Which of the statements given above is/are correct?
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• Correct Answer: A
• CAR (or CRAR) is the ratio of a bank's own funds to its risk-weighted assets, maintained to absorb losses and protect depositors.
• It is a regulatory standard set by RBI based on Basel Accords, not decided by individual banks.
• Statement 2 is incorrect.
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