It is also called capital to risk weighted asset ratio, is ratio of bank capital to risk. It determines the bank capacity to meet the NDTL(Net Demand And Time Liability) and other credit risks , operational risks etc.
It works like a cushion for potential losses.
CAR = (Tier 1 capital + Tier 2 capital ) / Risk weighted Asset
It works like a cushion for potential losses.
CAR = (Tier 1 capital + Tier 2 capital ) / Risk weighted Asset
TIER 1 CAPITAL = (paid up capital + statutory reserves + disclosed free reserves) - (equity investments in subsidiary + intangible assets + current & b/f losses))
TIER 2 CAPITAL = A) Undisclosed Reserves + B) General loss reserves + C) hybrid debt capital instruments and subordinate debts.
Paid up capital :
The amount of a company's capital that has been funded by shareholders. Paid-up capital can be less than a company's total capital because a company may not issue all of the shares that it has been authorized to sell. Paid-up capital can also reflect how a company depends on equity financing.
Paid-up capital is money that a company has received from the sale of its shares, and represents money that is not borrowed. A company that is fully paid-up has sold all available shares, and thus cannot increase its capital unless it borrows money through debt or is authorized to sell more shares.
Paid up capital :
The amount of a company's capital that has been funded by shareholders. Paid-up capital can be less than a company's total capital because a company may not issue all of the shares that it has been authorized to sell. Paid-up capital can also reflect how a company depends on equity financing.
Paid-up capital is money that a company has received from the sale of its shares, and represents money that is not borrowed. A company that is fully paid-up has sold all available shares, and thus cannot increase its capital unless it borrows money through debt or is authorized to sell more shares.
