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CS Professional · Banking and Insurance - Laws and Practice · Risk Management in Banks and Basel Accords

Sahyadri Bank has Common Equity Tier 1 capital of Rs 540 crore, Additional Tier 1 capital of Rs 60 crore and Tier 2 capital of Rs 100 crore. Its total risk-weighted assets are Rs 5,000 crore. What is its total Capital to Risk-weighted Assets Ratio (CRAR)?

CRAR is total regulatory capital divided by risk-weighted assets. Adding CET1, AT1 and Tier 2 gives Rs 700 crore, and dividing by Rs 5,000 crore gives 14%. Using only Tier 1 would wrongly give 12%.

  1. A10.8%
  2. B12.0%
  3. C14.0%Correct
  4. D15.6%

Explanation

Total capital = 540 + 60 + 100 = Rs 700 crore. CRAR = 700 / 5,000 = 14%. The 12.0% option counts only Tier 1 (600/5,000) and omits Tier 2, while 10.8% counts only CET1.

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