Page 218 - DMGT303_BANKING_AND_INSURANCE

Unit 10: Non-performing Assets

Capital Adequacy Ratio or CAR or CRAR is ratio of capital fund to risk weighted assets expressed Notes
in percentage terms.
The fundamental objective behind the capital adequacy calculation and fixing up the related
norms is to strengthen the soundness and stability of the banking system.

10.10 Keywords

Capital-Assets Ratio: Ratio of capital employed to assets.

Credit Risk: Risk of non-recovery of loans.
Insolvency Risk: The risk of insolvency of debtor.
Narasimha Committee: A Special committee appointed by RBI to suggest banking sector reforms.

Shareholder Wealth: Owners' wealth i.e. capital, profits and reserves.
Social Banking: Banking done for social development and advancement of the masses.

Speculation in Shares: Buying and selling of shares in anticipation (rise/fall) in their prices.
10.11 Review Questions

1. Explain the rationale of banking sector reforms.
2. Critically appraise the important banking sector reforms that have been implemented till
date.
3. Give a summary of the recommendations of the 2nd Narasimha Committee.

4. Classify NPAs according to their quality. Critically examine the measures taken to reduce
such assets.
5. Explain briefly recent trends in the Indian banking system.

6. Explain the main features of Innovative banking in India.
7. What are the principal defects in the Indian banking system? Give suggestions to remove
them.

Answers: Self Assessment

1 Non Performing Assets 2 Reporting
3 BI 4 Banks

5 SARFAESI Act 6 False
7 False 8 True
9 True 10 True

11 Floating 12 Liquidity
13 SPV 14 Securitization

15 DRTs

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