Capital Adequacy Ratio (CAR) Calculator
Capital Adequacy Ratio (CAR) Calculator: Ensuring Bank Stability
The Capital Adequacy Ratio (CAR) is a key measure used to ensure that a bank has enough capital to absorb potential losses and protect depositors.
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Our CAR Calculator helps you quickly determine a bank’s capital strength and whether it meets regulatory requirements.
What is Capital Adequacy Ratio?
CAR measures the ratio of a bank’s capital to its risk-weighted assets (RWA).
CAR Formula: CAR=Tier 1 Capital + Tier 2 CapitalRisk-Weighted Assets×100CAR = \frac{\text{Tier 1 Capital + Tier 2 Capital}}{\text{Risk-Weighted Assets}} \times 100CAR=Risk-Weighted AssetsTier 1 Capital + Tier 2 Capital×100
- Tier 1 Capital: Core capital including equity and disclosed reserves.
- Tier 2 Capital: Supplementary capital including subordinated debt.
- Risk-Weighted Assets (RWA): Total assets weighted by risk.
Regulatory bodies like RBI, Basel Committee mandate minimum CAR levels to ensure bank stability.
How to Use the CAR Calculator
- Enter Capital (Tier 1 + Tier 2).
- Enter Risk-Weighted Assets (RWA).
- Click Calculate.
The calculator displays CAR (%) and a color-coded indicator:
| CAR (%) | Interpretation | Indicator |
|---|---|---|
| ≥ 12 | Strong: Adequate capital buffer | ✅ Green |
| 10 – 11.99 | Moderate: Needs monitoring | ⚠️ Orange |
| < 10 | Low: Bank may be at risk | ❌ Red |
Example:
- Capital = ₹1,200,00,000
- RWA = ₹10,00,00,000
CAR=1200000001000000000×100=12%CAR = \frac{120000000}{1000000000} \times 100 = 12\%CAR=1000000000120000000×100=12%
✅ Strong: The bank has a healthy capital buffer.
Why CAR Matters
- For Regulators: Ensures banks remain solvent and stable.
- For Investors & Depositors: Indicates financial health and risk exposure.
- For Analysts: Helps assess a bank’s resilience to financial shocks.
Banks with higher CAR are better positioned to handle unexpected losses, while low CAR may indicate vulnerability.
Key Takeaways
- CAR measures a bank’s capital strength relative to risk-weighted assets.
- CAR ≥ 12%: Strong, well-capitalized bank.
- CAR 10–11.99%: Moderate, monitor carefully.
- CAR < 10%: Low, potential risk.
- Use CAR alongside other ratios like ROA, ROE, Net Profit Margin for complete financial analysis of banks.
Try the CAR Calculator Now
Use our Capital Adequacy Ratio Calculator to quickly check a bank’s capital strength and make informed financial or investment decisions.
