Comp

mponent
sofCapi
tal

Capi
talf
unds: hecapi
 T talf
undswoul
dincl
udet
hecomponent
sTi
erIcapi
talandTi
erI
I

capi
tal
.

El
em
meent
sofTi
erICapi
tal
: heel
 T ement
sofTi
erIcapi
tali
ncl
udes:

(
i) Pai
d-up capi
tal (
ordi
nary shares)
, st
atut
ory r
eserves, and ot
her di
scl
osed f
ree

r
eser
ves
,ifany
;

(
ii
)Perpet
ualNon-
cumul
ati
vePr
efer
enceShar
es(
PNCPS)el
igi
blef
ori
ncl
usi
on asTi
erI

c
api
tal-s
ubj
ectt
ola
ws
wsinf
orc
efr
om t
imet
oti
me;

(
ii
i)I
nno
vat
ivePe
rpe
tualDe
btI
nst
rume
nts(
IPDI
)el
igi
blef
ori
ncl
usi
on asTi
erIc
api
tal
;

and

(
iv)Capi
talr
eser
vesr
epr
ese
nti
ngsur
plusar
isi
ngouto
fsal
epr
oce
edsofas
set
s.

El
eme
ment
sofTi
erI
ICapi
tal
:Theel
eme
me
ntsofTi
erI
Icapi
tali
ncl
ude

Undi
scl
osedr
eserves,r
eval
uat
ionr
eserves,gener
alpr
ovi
sionsandl
ossr
eserves,hybri
d

capi
tali
nst
rument
s,subor
dinat
eddebtandi
nves
tmentr
eser
veaccount
.

(
a)Undi
scl
osedReserves

 Theycan bei
ncl
udedi
n capi
tal
,ift
heyr
epr
esentaccumul
ati
onsofpos
t-t
axpr
ofit
sand

ar
e not e
ncumb
mber
ed by any known l
iabi
li
ty and shoul
d not be r
out
inel
y use
dfor

absorbi
ngnorma
mall
ossoroper
ati
ngl
osses.

(
b)Reval
uat
ionReserves

I
twoul
dbeprudentt
oconsi
derr
eval
uat
i eservesatadi
on r scountof55percent 
whi
le

de
ter
mi
mini
ngt
hei
rval
uef
ori
ncl
usi
oni
nTi
erI
Icapi
tal
.

(
c)GeneralPr
ovi
sionsandLossReserves

Gener
alpr
ovi
sions/l
ossr
eserveswi
llbeadmi
tt oamaxi
edupt mum of1.
25 per
centof

t
otalri
skwei
ght
ed assets,
 w
 whi
cheveri
slower
,ist
aken

Excesspr
ovi
sionswh
whi
chari
seonsal
eofNPAswoul
dbeel
igi
bleTi
erI
Icapi
talsubj
ectt
o

t
heo
ver
allc
eil
ingof1.
25% oft
otalRi
skWe
ight
edAs
set
s.

e)Subor
dinat
edDe
Debt
 Bankscan r
aise,wi
tht
heappr
ovaloft
hei
rBoar
ds,r
upee-
subor
dinat
eddebtasTi
erI
I

c
api
tal
.

Deduct
ionsf
rom Ti
erICapi
tal
:Thef
  oll
owi
ngdeduct
ionsshoul
d bemadef
rom Ti
erI

capi
tal
:

(
a)I
ntangi
bleasset
sand l
ossesi
nthecur
rentperi
od and t
hosebr
oughtf
orwardf
rom

pr
evi
ousperi
odsshoul
dbededuct
edf
rom Ti
erIcapi
tal
;

(
b)Cr
eat
ionofdef
err
edt
axasset(
DTA)r
esul
tsi
n ani
ncreasei
n Ti
erIcapi
talofabank

 wi
thoutany t
angi
bleasse
tbei
ng addedt
othe banks
’bal
ance shee
t.Ther
efor
e,DTA,

 whi
chi
sani
ntangi
bleasse
t,shoul
dbededuct
edf
rom Ti
erIcapi
tal
.

Deduct
ionsf
rom Ti
erIandTi
erI
ICapi
tal

a.Equi
ty/non-
equi
tyi
nvest
ment
sinsubsi
diari
es

 Thei
nves
tment
sofabanki
ntheequi
tyaswel
lasnon-
equi
tycapi
tali
nst
rument
sissued

 by a subsi
diar
y,whi
ch ar
ereckoned t
owar
ds i
tsr
egul
ator
y capi
talas per nor
ms

pr
escri
bedbyt
her
espect
iver
egul
ator
,shoul
dbededuct
edat50percenteach,f
rom Ti
er

IandTi
erI
Icapi
taloft
hepar
entbank,whi
leassessi
ngt
hecapi
taladequacyoft
hebank

on'
sol
o'basi
s,undert
heBaselIFr
amework.

Li
mitf
orTi
erI
Iel
ement
s

 Ti
erI
Iel
ement
sshoul
dbel
imi
tedt
oamaxi
mum of100percentoft
otalTi
erIel
ement
s

f
ort
hepur
poseofcompl
iancewi
tht
henor
ms.

No
te:Ti
erI
Icapi
talc
anno
tbemo
ret
hanTi
erIc
api
tal
.

El
eme
ntoft
ier
-II
Icapi
tal
;

• Shortter
m subor
dinat
eddebt
• Shortt
erm bondwit
hanorigi
nalmat
uri
tyof2Yeara.

Not
e:

 Ti
er-
IIIcapi
tali
sli
mit
edt
o250% ofTier
-I
 28.
5% ofmarketr
iskneedst
obesupport
edbyTi
er-
I

Mi
nimum r
equi
rementofCapi
talFunds
 Banksar
erequi
redt
omai
ntai
nami
nimum CRAR of9perce
ntonanongoi
ngbasi
s.

Commoncapi
talRat
io:

 Ti
er-
Icapi
tal
-6%

 Ti
er-
IICapi
tal
-3%

Capi
talAdequacyRat
io:

Capi
talAde
quac
yRat
io=(
Tie
rIc
api
tal+(Ti
erI
Icapi
tal
)/RWA

RWA=Capi
tal(
TierI+I
I)xCAR

Capi
talade
quac
yra
tio
(C)=Re
gul
ato
rycapi
tal
(R)
/Tot
alr
iskwe
ight
edas
set
s(T)
.

Regul
atoryCapi
tal‘
R’=C*
TandTot
alRi
skwei
ght
edAsset
s‘T’
=R/C

 Tot
al Ri
sk wei
ght
ed asse
ts =(
Risk wei
ght
ed asse
tsf
or cr
edi
tri
sk) +(
12.
5*Capi
tal

r
equi
rementf
ormar
ketri
sk)
+(12.
5*Capi
talr
equi
rementf
oroperat
ionalri
sk)

NetI
nter
estI
ncome=I
nter
estI
ncome-I
nter
estExpenses.

NetI
nter
estMargi
n(NI
M)=NetI
nter
estI
ncome/Aver
aget
otalAsset
s.

Economi
cEqui
tyRat
io=Shar
ehol
der
sfunds/Tot
alasse
ts.

Pr
ofit=I
nteres
tIncome-I
nteres
texpense-pr
ovi
sionf
orl
oanl
oss+non-
int
eres
t

r
eve
nue–noni
nter
estexpense–t
axes.

PROVI
SION REQUI
REMENT:

LossAsse
t :100%

Doubt
fulAsse
t(Unsecur
edPor
tion) :100%

Doubt
fulAsse
t(Secur
ed–upt
o1Ye
ar) :25%

Doubt
fulAsse
t(Secur
ed–upt
o3Ye
ar) :40%

Doubt
fulAsse
t(Secur
ed–mor
ethan3ye
ar)
:100%

Subs
tandar
d(Secur
ed) :15%

Subs
tandar
d(Unsecur
ed) :25%

I
nfr
ast
ruct
ureLoan :
20%
 ForStandar
dAss
ets:

Di
rectadv
ancet
oAgr
i& SME :0.
25%

Commer
cialRealEs
tat
e :1%

Hous
ingLoanwi
thTeaserRat
es :2%

Res
truct
uredAdvances :2.
75%

 Al
lot
heradv
ances :0.
40%

Pr
ovi
sioni
ngCov
erag
eRat
io =Pr
ovi
sionAmount
/Gr
ossNPA

Ri
skAdj
ust
edRet
urnon Capi
tal(
RAROC)
:

RAROC =Expect
edRe
tur
n/Economi
cCapi
tal
.

RAROC =Expec
tedRe
tur
n/Val
ueatRi
sk

(
Revenue–Expense s–Expec t
edLoss+I ncomeFr om Capit
al)
/Capi t
al.
RAROC =-
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--
Capital

Revenue–Expenses
ROA = -
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  Assets

Revenue–Expenses
ROE = -
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  Equity

Revenue–Expenses
ROC = -
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--
  Capital

Modi
fieddur
ati
on=McCaul
ey'
sdur
ati
on/(1+yi
eld)

% changei
npr
ice=-modi
fieddur
ati
on×yi
eldchange