Aartee Mishra is teaching live on Unacademy Plus
batily Lecture Series Ramest Singh's brief stummary of unacademy Indian Economy By Aartee Mishra Banking in India-D s$ Hindi
WILFUL DEFAULTER There are many people and entities who borrow money from lending institutions but fail to repay. However, not all of them are called wilful defaulters As is embedded in the name, a wilful defaulter is one who does not repay a loan or liability, but apart from this there are other things that define a wilful defaulter. According to the RBI, a wilful defaulter is one who-is financially capable to repay and yet does not do so or one who diverts the funds for purposes other than what the fund was availed for or with whom funds are not available in the form of assets as funds
CAPITAL ADEQUACY RATIO The capital adequacy ratio (CAR) is a measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures. Also known as capital-to-risk weighted assets ratio (CRAR), it is used to protedt depositors and promote the stability and efficiency of financial systems around the world Providing cushion/shock-absorbers to banks has seen three major developments: The provision of keeping a cash ratio of total deposits mobilised by the banks (known as the CRR in India) a. b. the provision of maintaining some assets of the deposits mobilised by the banks with the banks themselves in non-cash form (known as the SLR in India) The provision of the capital adequacy ratio (CAR) norm. c.
Why to maintain CAPITAL ADEQUACY RATIO The basic question which comes to mind is as to why do the banks need to hold capital in the form of CAR norms? Two reasons have been generally forwarded for the same: Bank capital helps to prevent bank failure, which arises in case the bank cannot satisfy its obligations to pay the depositors and other creditors. The low capital bank has a negative net worth after the loss in its business. In other words, it turns into insolvent capital, therefore, acts as a cushion to lessen the chance of the bank turning insolvent The amount of capital affects returns for the owners (equity holders) of the bank a. b.
UNACADEMY PLUS NCERT (6 12th): For rock solid foundation to your preparation By Aartee Mishra