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

Vaigai Bank's notes to accounts disclose its Capital to Risk-weighted Assets Ratio (CRAR). Tier 1 capital is Rs 900 crore, Tier 2 capital is Rs 300 crore and total risk-weighted assets are Rs 10,000 crore. What is the total CRAR and the Tier 1 ratio?

Total CRAR is 12 percent, since Tier 1 plus Tier 2 capital of 1,200 crore divided by risk-weighted assets of 10,000 crore gives 12 percent. The Tier 1 ratio is 900 divided by 10,000, which is 9 percent.

  1. A12% and 9%Correct
  2. B9% and 12%
  3. C12% and 3%
  4. D10% and 9%

Explanation

Total capital = 900 + 300 = 1,200 crore. CRAR = 1,200/10,000 = 12%. Tier 1 ratio = 900/10,000 = 9%. Option 3 uses Tier 2 alone as the second ratio; option 2 swaps the figures.

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