Q. How is Capital Adequacy Ratio of banks calculated by RBI?
Answer: (Tier 1 Capital + Tier 2 capital)/ Risk weighted assets
Notes: Capital Adequacy Ratio (CAR) is also known as Capital to Risk (Weighted) Assets Ratio (CRAR). Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed as a percentage of its risk-weighted asset. It is defined as (Tier 1 Capital + Tier 2 capital)/ Risk weighted assets.