Only two public sector banks out of 19 -- Indian Bank (negative CAR) and Dena Bank (7.73 per cent) -- did not meet the stipulated capital to risk-weighted assets ratio or capital adequacy ratio (CAR) of 9 per cent as of March 31, 2001.
Prudential capital adequacy norms (as enumerated in the Basle Committee Recommendations for the Banking Sector) call for a minimum capital adequacy ratio of 9 per cent for banks.
This means, for every Rs 100 that a bank lends out of the deposits that it receives, it needs a total capital of Rs 9 as a buffer against the loan default risk.
This is because commercial loans are full of risks and therefore, the banks must guard themselves against huge defaults.
(But banks in India don't need to maintain such ratios for the money that they pour into government securities since gilts are considered zero-risk, being government paper. The total exposure of banks in gilts runs into thousands of crores of rupees.)
Of the 31 private sector banks, two -- Benares State Bank and Nedungadi Bank -- have reported negative CARs, while Catholic Syrian Bank had a CAR of 6.08 per cent.
All the 42 foreign banks in India have reported a CAR of above 9 per cent. Among the 27 PSBs, the top five banks on the CAR front are : State Bank of Saurashtra has 13.89 per cent followed by Andhra Bank (13.40 per cent), Corporation Bank (13.30 per cent), Bank of Baroda (12.80 per cent) and State Bank of India (12.79 per cent).
Of the 31 private sector banks, the top five banks with respect to CAR are : SBI Commercial & International Bank Ltd (19.85 per cent), Tamilnad Mercantile Bank (17.59 per cent), Jammu & Kashmir Bank (17.44 per cent), Centurion Bank (16.49 per cent) and Nainital Bank (15.81 per cent).
Among foreign banks, the top five according to their CAR are : Overseas Chinese Banking Corporation (168.11 per cent), Krung Thai Bank Public Co Ltd (148.99 per cent), Bank Internasional Indonesia (103.78 per cent), Arab Bangladesh Bank (96.34 per cent) and Sonali Bank (88.14 per cent).
