Regulatory Capital and Capital Adequacy
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Risk Management — Risk Management.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is regulatory capital in the context of Indian banking?
Regulatory capital is the minimum capital that banks are required to maintain as mandated by RBI to absorb unexpected losses and ensure solvency. It acts as a buffer against risks arising from a bank's operations.
What is the minimum CET1 ratio required by RBI under Basel III for Indian banks?
5.5% of Risk-Weighted Assets as per RBI norms
What does CRAR stand for and what does it measure?
CRAR stands for Capital to Risk-weighted Assets Ratio and it measures the proportion of a bank's capital to its risk-weighted assets. It indicates the bank's capacity to absorb losses relative to its risk exposure.
What is the total minimum capital requirement including Capital Conservation Buffer under Basel III for Indian banks?
10.875% CRAR including 2.5% CCB
What is the minimum CRAR prescribed by RBI for Indian commercial banks under Basel III?
RBI prescribes a minimum CRAR of 9% for Indian commercial banks under Basel III, which is higher than the Basel Committee's minimum of 8%. This higher floor reflects RBI's conservative regulatory approach.
What are the eligibility criteria for an instrument to qualify as CET1 capital?
Permanent, fully paid-up, absorbs losses first, no maturity
What are the three pillars of the Basel II framework?
The three pillars of Basel II are: Pillar 1 (Minimum Capital Requirements), Pillar 2 (Supervisory Review Process), and Pillar 3 (Market Discipline through disclosure requirements). Together they form a comprehensive risk management framework.
What is Pillar 2 of the Basel framework and what does it address?
Supervisory Review Process addressing bank-specific risks beyond Pillar 1
Video classes for this chapter
More chapters in Module E - Risk Organization and Policy
Master the full RISKMANAGEME syllabus
Every chapter of Risk Management — videos, tests, notes and one-liner decks in one place.