Question : RBI has recently deferred implementation of provisions made under Basel III capital due to uncertainty related to Covid crisis.What is the minimum capital adequacy ratio that banks must maintain Under Basel III ?
(a)1.5 percent
(b)2.5 percent
(c)0.5 percent
(d)none of the above
Answer (d)
Related facts
- RBI has recently(29 September 2020) deferred implementation of provisions made under Basel III capital due to uncertainty related to Covid crisis.
- In two separate notifications, RBI said it would push back the final tranche of the capital conservation buffer (CCB) and the implementation of net stable funding ratio by six months.
- The capital conservation buffer (CCB) is designed to ensure that banks build up capital buffers during normal times which can be drawn down as losses are incurred during a stressed period.
As per the guidelines, banks in India were required to maintain NSFR(Net Stable Funding Ratio) of 100% from 1 April 2020. The RBI has now deferred it for a second time to 1 April 2021.
Capital Adequacy Ratio
Capital Adequacy Ratio (CAR) is the ratio of a bank’s capital in relation to its risk-weighted assets and current liabilities.
It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
The formula used to measure Capital Adequacy Ratio is = (Tier I + Tier II + Tier III (Capital funds)) /Risk weighted assets)
By — Pankaj Pandey.
Link:
https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11970&Mode=0
https://www.livemint.com/industry/banking/rbi-defers-basel-iii-provisions-amid-covid-uncertainty-11601394391786.html