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Capital Adequacy

Capital Adequacy

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Published by Divya Gupta

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Published by: Divya Gupta on Mar 07, 2011
Copyright:Attribution Non-commercial

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01/13/2013

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CAPITAL ADQUACY  
 
Capital Adequacy
General
With a view to adopting the Basle Committeeframework on capital adequacy norms which takesinto account the elements of risk in various types of assets in the balance sheet as well as off-balancesheet business and also to strengthen the capital baseof banks, Reserve Bank of India decided in April 1992to introduce a risk asset ratio system for banks(including foreign banks) in India as a capitaladequacy measure.
 
E
ssentially, under the above system the balancesheet assets, non-funded items and other off-balance sheet exposures are assigned weightsaccording to the prescribed risk weights and bankshave to maintain unimpaired minimum capital fundsequivalent to the prescribed ratio on the aggregateof the risk weighted assets and other exposures onan ongoing basis. The broad details of the capitaladequacy framework are detailed below.

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