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CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Under Basel III norms as applied by RBI, Godavari Bank has risk-weighted assets of Rs 8,000 crore. The minimum CRAR is 9% and the Capital Conservation Buffer is 2.5% of RWA, to be met with CET1. What is the minimum total capital the bank must hold, including the buffer?

The bank needs Rs 920 crore. The minimum CRAR of 9% plus the 2.5% Capital Conservation Buffer gives 11.5% of Rs 8,000 crore of risk-weighted assets. Ignoring the buffer would give only Rs 720 crore.

  1. ARs 720 crore
  2. BRs 920 croreCorrect
  3. CRs 1,000 crore
  4. DRs 200 crore

Explanation

Minimum total capital with buffer = 9% + 2.5% = 11.5% of 8,000 = Rs 920 crore. Rs 720 crore ignores the buffer. Rs 200 crore is only the buffer.

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