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CRAR– Capital to Risk-weighted Asset Ratio
The capital adequacy ratio (CAR) is an estimation of a bank’s available capital expressed as a percentage of a bank’s risk-weighted credit exposures. CRAR is used to protect the interest of depositors and promote the stability and efficiency of financial systems
What is CRAR?
CRAR is a financial ratio that measures a bank’s capital to its risk. In other words, CRAR is the amount of money a bank has in reserve to cover losses on its loans. A higher CRAR ratio means a bank is in a better position to weather any financial storm.
Calculating CAR
The capital adequacy ratio is calculated by dividing a bank’s capital by its risk-weighted assets. The capital used to calculate the capital adequacy ratio is divided into two tiers.
CAR= Tier 1 capital +Tier 2 capital risk-weighted assets
Tier-1 capital, or core capital, consists of equity capital, ordinary share capital, intangible assets and audited revenue reserves.
Tier-2 capital comprises unaudited retained earnings, unaudited reserves and general loss reserves.
Benefits of CRAR
Capital to Risk-Weighted Asset Ratio is an important tool for assessing a bank’s financial health. By understanding CRAR, you can be sure that your bank is healthy and able to continue lending money to your business. CRAR is a calculation of a bank’s Tier I and Tier II capital in relation to its risk-weighted assets. The CRAR calculation helps banks determine if they have enough capital to cover their risks. CRAR is important because it protects depositors and helps to ensure that banks can continue lending money.
Factors Related to CRAR
- CRAR is calculated by taking a company’s core capital and dividing it by its risk-weighted assets.
- CRAR reflects a company’s ability to absorb losses in the event of a downturn.
- CRAR is an important metric for banks and other financial institutions because it determines their level of regulatory capital.
- CRAR is also used to assess a company’s credit rating.
- A higher CRAR indicates a stronger financial position and a lower risk of default.
- CRAR is an important metric for banks and other financial institutions because it determines their level of regulatory capital.
- CRAR is also used to assess a company’s credit rating. A higher CRAR indicates a stronger financial position and a lower risk of default.
Conclusion
CRAR is important to businesses because it can help improve employee productivity and reduce costs. But what exactly is CRAR, and how can your business benefit from it? Let’s take a closer look at this growing field of research. CRAR has been shown to be beneficial for businesses in a number of ways. First, it can help employees become more productive by improving their working environment. Second, it can help reduce costs by optimizing office layout and design. Finally, CRAR research can provide companies with valuable insights into how people work and interact with their surroundings.
