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ENHI

RAS question

Basel III norms require banks to maintain minimum CRAR of:

Correct answer: (A) 9%.

Under RBI's Basel III-based framework for banks in India, the minimum Capital to Risk-weighted Assets Ratio is 9%.

  1. (A)

    9%

  2. (B)

    10%

  3. (C)

    8%

  4. (D)

    12%

Explanation

CRAR measures a bank's capital against its risk-weighted assets, so it is a direct prudential buffer against losses. The Reserve Bank of India compares the regulatory framework for NBFCs and banks and gives banks a minimum CRAR of 9%, along with the capital conservation buffer and counter-cyclical buffer, under a Basel III-based framework. The Indian banking requirement is 9%, even though the global Basel minimum is 8%. The 9% requirement is understood as minimum Tier-1 capital of 7% and Tier-2 capital of 2%, so the RAS-relevant figure is the RBI's Indian requirement, not the international floor.

Why the other options are wrong

  • (B) 10% overstates the RBI's minimum CRAR requirement for banks under the Basel III-based Indian framework, which is 9%.
  • (C) 8% reflects the global Basel minimum, but India applies a higher RBI minimum of 9% for banks.
  • (D) 12% is above the RBI minimum and is not the minimum CRAR figure required for Indian banks.

Concept

Banking regulation under Indian Economy covers Basel norms as implemented by the RBI. CRAR recurs in RAS because it links financial stability, bank supervision and prudential regulation in one examinable number.

Source

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