In Sharjah เฏต(+971)558539980 *_เฏตabortion pills now available.
ย
Capital Adequacy Ratio for Commerical Banks.ppt
1. Prudential norms for capital
adequacy
โข Introduced with a view to adopt Basel
committee norms
โข Risk element in various types of assets
are considered
โข Each assets are assigned prescribed risk
weight
โข Banks have to maintain prescribed ratio of
capital funds on the aggregate of risk
weighted assets on an ongoing basis
3. Capital adequacy framework
โข Capital funds
โข Risk adjusted assets
โข Off balance sheet items
โข Capital adequacy for subsidiaries
4. Capital funds
โข Capital adequacy norms were introduced
in April 1992
โข Made effective from March 1996
5. Capital funds
โข Until 2003 CAR was applicable only to
credit risk
โข For market risk for investment
โ For Held For Trading category introduced
during 2004 โ 05
โ For Available For Sale category introduced in
2006
โข Under Basel II CAR is also for operational
risk
6. Elements of capital fund for Indian
banks
โข Tier I Capital (Core Capital)
โ Permanent shareholders equity โ consist of
paid up capital, statutory and other reserves,
less: Investment in subsidiaries, intangible
assets, and cumulative losses, if any
โ Perpetual debt instruments
โ Perpetual non cumulative preference shares
7. Capital funds for Indian banks..
โข Tier II Capital (Supplementary capital)
โ Redeemable preference shares
โ Revaluation reserve
โ Hybrid debt capital instruments
โ Long term subordinated debt
โ Debt capital instruments โ bonds / debentures
8. Limit
โข Tier II capital is limited to 100 % of Tier I
capital
โข Tier II capital can be considered for the
purpose of capital adequacy only up to an
amount equal to Tier I capital
โข Subordinated debt is limited to 50 % of
Tier I capital
9. Capital funds for Indian banks..
โข Tire III capital
โ It includes only short term subordinated debt
โข Tire III capital can be considered for
supporting market risk only. Not for credit
risk
โข Tire I & II capital can be used to support
market risk
10. Capital funds for foreign banks
โข Tier I capital
โ Interest free funds from HO kept in Indian books for
the purpose of meeting CAR
โ Statutory reserve kept in Indian books
โ Capital reserve arising due to sale of assets in India
not eligible for repatriation till bank function in India
โ Interest free funds remitted from abroad for
acquisition of property in India
โ Inter office adjustment bal. with HO or overseas
branches. If it is credit bal. โ ignore. If it is debit bal. it
is to be set-off against capital
11. Capital funds for foreign banks
โข Tier II capital
โ Same as applicable to Indian banks
โข Minimum CAR
โ For Indian as well as foreign banks 9 % on an
ongoing basis
12. Risk adjusted assets
โข Bank should maintain CAR for
โ Credit risk
โ Market risk on securities (Held for Trading & Available
for Sale)
โ Open gold position
โ Open forex position
โ Trading position in derivatives
โ Derivatives for hedging
โข Each of the above assets is to be assigned
prescribed weight in percentage
13. Off balance sheet items
โข Multiply face value of off balance sheet
items by credit conversion factor
โข This should then be again multiplied by the
prescribed risk weight
14. Capital adequacy for subsidiaries
โข While computing capital fund parent bank
(holding co.) may consider following points
โ Non bank subsidiaries have to maintain CAR
prescribed by their respective regulator
โ In case of any short fall by subsidiary the
parent bank should maintain capital in
addition to its own CAR