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What is CRR?
CRR stands for Cash Reserve Ratio, A certain amount of money is kept out of profit in a reserve percentage which has to be used to compensate any contingent fluctuation into the business and bank.
What is SLR?
SLR, statutory liquidity ratio is the amount of money that is invested in certain specified securities predominantly central government and state government securities. The SLR, the money goes into investment predominantly in the central government securities.
What is Letter of Credit?
It is an arrangement where the customers requested to his bank where is having the account to do the payment to the beneficiary within a prescribed time limit against stipulated documents.
What is Capital adequacy ratio?
Definition: Capital Adequacy Ratio (CAR) is the ratio of a bank's capital in relation to its risk-weighted assets and current liabilities. It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.
Description: It is measured as
Capital Adequacy Ratio = (Tier I + Tier II + Tier III (Capital funds)) /Risk-weighted assets
The risk-weighted assets take into account credit risk, market risk, and operational risk.
The Basel III norms stipulated a capital to risk-weighted assets of 8%. However, as per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% while Indian public sector banks are emphasized to maintain a CAR of 12%.
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