CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks
Sahyadri Bank has Common Equity Tier 1 capital of Rs 540 crore, Additional Tier 1 capital of Rs 60 crore, Tier 2 capital of Rs 100 crore and total risk-weighted assets of Rs 5,000 crore. What is its total capital adequacy ratio (CRAR)?
The CRAR is 14%. Total regulatory capital is the sum of CET1, AT1 and Tier 2, which is Rs 700 crore, divided by risk-weighted assets of Rs 5,000 crore. Counting only Tier 1 would wrongly give 12%.
- A10.8%
- B12.0%
- C14.0%Correct
- D13.2%
Explanation
Total capital = 540 + 60 + 100 = Rs 700 crore. CRAR = 700 / 5,000 = 14%. Option 12.0% counts only Tier 1 (600/5,000), omitting Tier 2. Option 10.8% counts only CET1.
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