Query : |
The bank takes deposits and deploy them in Advances and Non fundbased activities like LC And BG.
The bank assume exposure in any loan transactions. The CAR ratio has been prescribed in order to abstain the bank to overplay with the public funds i.e deposits. so currently 8 percent is the prescribed ratio. Which means that bank should have at least this much of its own funds and not of the depositors.
Calculation part is difficult but in sum the capital is calculated and than it is compared with the Exposures. For every exposure a seperate risk weight is prescribed for example certain type of loan are given more rist weight.
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