SaralUPSC
  • Home
  • Blogs
  • Prelims Questions
  • Mains Questions
  • Tests
Start Free Test
SaralUPSC

Saral Preparation Pvt. Ltd.

Delhi, India

support@saralupsc.com

Toll Free: 1800 000 0000

Office Hours: 10 AM – 7 PM (All 7 days)

Company

  • About Us
  • Careers
  • Contact Us
  • Media
  • Sitemap

Products

  • Test Series
  • Live Quizzes
  • Notes
  • Videos
  • Blog

Useful Links

  • Prelims Questions
  • Mains Questions
  • Free Tests
  • Sign Up
  • Login

Follow us

© 2026 Saral Preparation Pvt. Ltd.. All rights reserved.

  • Privacy
  • Terms
  • User Policy
  1. Home
  2. /Prelims Questions
  3. /International Relations
  4. /Question
International Relations·Easy

Which of the following statements is/are correct? 1. The capital adequacy ratio (CAR) is a measurement of a bank's available capital expressed as a percentage of the bank's risk-weighted credit exposures. 2. CAR is critical to ensure that banks have enough cushion to absorb a reasonable amount of losses before they become insolvent. Select the correct answer using the code given below:

Which of the following statements is/are correct?

1. The capital adequacy ratio (CAR) is a measurement of a bank's available capital expressed as a percentage of the bank's risk-weighted credit exposures. 

2. CAR is critical to ensure that banks have enough cushion to absorb a reasonable amount of losses before they become insolvent.

Select the correct answer using the code given below:

Options

  1. a.

    1 only

  2. b.

    2 only

  3. c.

    Both 1 and 2

    Correct answer
  4. d.

    Neither 1 nor 2

Explanation

  • The capital adequacy ratio (CAR) is a measurement of a bank's available capital expressed as a percentage of the bank's risk-weighted credit exposures. The capital adequacy ratio, also known as capital-to-risk weighted assets ratio (CRAR), is used to protect depositors, and promote the stability and efficiency of the financial systems around the world. 
  • The reason minimum capital adequacy ratios (CARs) are critical is to make sure that banks have enough cushion to absorb a reasonable amount of losses before they become insolvent and consequently lose depositors’ funds.
  • The capital adequacy ratios ensure the efficiency and stability of a nation’s financial system by lowering the risk of banks becoming insolvent. Generally, a bank with a high capital adequacy ratio is considered safe and likely to meet its financial obligations.

Share

  • Share on X
  • Share on WhatsApp
  • Share on LinkedIn

Related prelims questions

  • The term 'West Texas Intermediate', sometimes found in news, refers to a grade of

    International Relations · Easy

  • If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. Not depending on short-term foreign borrowings 2. Opening up to more foreign banks 3. Maintaining full capital account convertibility Select the correct answer using the code given below:

    International Relations · Easy

  • Out of the following statements, choose the one that brings out the principle underlying the Cabinet form of Government:

    International Relations · Easy

  • A country is said to have reduced the Poverty Gap Ratio from 2010-11 to 2019-2020. What does it imply?

    International Relations · Easy