Other risk-weighted assets are (C) 1500
Total RWA (A+B+C) = 1768.75
Step 3: Computation of Tier II capital
| Particulars |
Amount |
Discount Rates |
Amount |
| Undisclosed reserves |
50 |
0 |
50 |
| General provision and loss reserves (1.25% of RWA or 50 whichever is minimum) |
50 |
-- |
22.11 |
| Revaluation reserves |
40 |
55 |
18 |
| Subordinated debt |
|
| Maturity between 2 to 3 years |
30 |
60 |
12 |
| Maturity between 4-5 years |
30 |
20 |
242 |
| Maturity within one year |
10 |
100 |
0 |
| Tier II capital |
|
126.325 |
Step 4: Compute Capital Adequacy Ratio
| |
Rs (in Crore) |
| Tier I capital (A) |
150 |
| Tier II Capital (B) |
126.11 |
| Total RWA(C) |
1768.75 |
| CAR= (A+B)/C |
0.1561 |
Therefore, we see that Capital Adequacy Ratio of the bank is 15.47%
Conclusion
The criteria to decide the extent and the structure of Capitalisation by Indian Banks can be summarized as under:-
Capital of a Bank should relate to its risk-oriented assets;
RWA or risk-weightage of assets to be calculated as per prescribed norms;
Capital adequacy or quantum of capital required for the bank is 10% of RWA;
Of this Tier 1 Capital should be minimum 50% and the balance can be Tier II capital;
Tier I Capital includes Paid up equity capital; Statutory reserves; Capital reserves; Other disclosed free reserves
Tier II capital may include- Undisclosed reserves and cumulative perpetual preference shares; 45% of. Revaluation Reserves (RR); General Provisions and Loss Reserves (GPLR)- Actual GPLR or 1.25% of Risk Weighted Assets, whichever is lower; Hybrid Debt Capital Instruments-; and Subordinated Debts.
Tier II Capital not to exceed the amount of Tier I Capital.
