Explain with reason:
with a rise in NPA exerting pressure on their profitability Indian Banks Capital Adequacy Ratio
CAR has fallen in the aftermath of global slowdown of 2008
Solution
An asset is called a non performing asset when it stops generating income for a bank. It is
contributed by factors such as change in government policies exchange rate fluctuations business
failure and in efficiency of the management. Inefficient Credit Management and monitoring and
overall recession in the economy are other factors which contribute to npa formation. Since the
income is not generated, it directly reduces the profitability of the Banks.
Increase in npa increases the capital requirements of a depository institution. Banks are required
to maintain an adequate capital adequacy ratio on risk weighted assets. This increase in npa has
resulted in bringing down the banking Industries capital adequacy ratio to 11.2% in March 2018
as compared to 13.3% in March 2017..
Explain with reason with a rise in NPA exerting pressure on the.pdf
1. Explain with reason:
with a rise in NPA exerting pressure on their profitability Indian Banks Capital Adequacy Ratio
CAR has fallen in the aftermath of global slowdown of 2008
Solution
An asset is called a non performing asset when it stops generating income for a bank. It is
contributed by factors such as change in government policies exchange rate fluctuations business
failure and in efficiency of the management. Inefficient Credit Management and monitoring and
overall recession in the economy are other factors which contribute to npa formation. Since the
income is not generated, it directly reduces the profitability of the Banks.
Increase in npa increases the capital requirements of a depository institution. Banks are required
to maintain an adequate capital adequacy ratio on risk weighted assets. This increase in npa has
resulted in bringing down the banking Industries capital adequacy ratio to 11.2% in March 2018
as compared to 13.3% in March 2017.
