RBI/2005-06/40 DBOD No. BP.BC. 13/21.01.002 /2005-06,Dt. 04/07/2005
Master Circular- Prudential Norms on Capital Adequacy (Part - I)
Please refer to the Master Circular No. DBOD. BP. BC. 12/ 21.01.002/ 2004- 2005 dated July 19, 2004 consolidating instructions/ guidelines issued to banks till 6th July 2004 on matters relating to prudential norms on capital adequacy. The Master Circular has been suitably updated by incorporating instructions issued up to 30th June 2005 and has also been placed on the RBI web-site (http: // www.rbi.org.in).
It may be noted that all relevant instructions on the above subject contained in the circulars listed in the Appendix have been consolidated. We advise that the revised Master Circular supersedes the instructions contained in these circulars issued by the RBI.
Yours faithfully,
(Anand Sinha)
Chief General Manager-in-Charge
PRUDENTIAL NORMS ON CAPITAL ADEQUACY1. General
1.1 With a view to adopting the Basle Committee framework on capital adequacy norms which takes into account the elements of risk in various types of assets in the balance sheet as well as off-balance sheet business and also to strengthen the capital base of banks, Reserve Bank of India decided in April 1992 to introduce a risk asset ratio system for banks (including foreign banks) in India as a capital adequacy measure.
1.2 Essentially, under the above system the balance sheet assets, non-funded items and other off-balance sheet exposures are assigned weights according to the prescribed risk weights and banks have to maintain unimpaired minimum capital funds equivalent to the prescribed ratio on the aggregate of the risk weighted assets and other exposures on an ongoing basis. The broad details of the capital adequacy framework are detailed below.
2. Capital funds
2.1 Capital funds of Indian banks
For Indian banks, 'capital funds' would include the following elements:
2.1.1 Elements of Tier I capital
i) Paid-up capital, statutory reserves, and other disclosed free reserves, if any.
ii) Capital reserves representing surplus arising out of sale proceeds of assets.
2.1.2 Equity investments in subsidiaries, intangible assets and losses in the current period and those brought forward from previous periods, should be deducted from Tier I capital.
2.1.3 In the case of public sector banks which have introduced Voluntary Retirement Scheme (VRS), in view of the extra-ordinary nature of the event, the VRS related Deferred Revenue Expenditure would not be reduced from Tier I capital. However, it will attract 100% risk weight for capital adequacy purpose.
2.1.4 Creation of deferred tax asset (DTA) results in an increase in Tier I capital of a bank without any tangible asset being added to the banks’ balance sheet. Therefore, DTA, which is an intangible asset, should be deducted from Tier I capital.
2.1.5 Elements of Tier II capital
i) Undisclosed reserves and cumulative perpetual preference shares
These often have characteristics similar to equity and disclosed reserves. These elements have the capacity to absorb unexpected losses and can be included in capital, if they represent accumulations of post-tax profits and not encumbered by any known liability and should not be routinely used for absorbing normal loss or operating losses. Cumulative perpetual preference shares should be fully paid-up and should not contain clauses, which permit redemption by the holder.
ii) Revaluation reserves
These reserves often serve as a cushion against unexpected losses, but they are less permanent in nature and cannot be considered as ‘Core Capital’. Revaluation reserves arise from revaluation of assets that are undervalued on the bank’s books, typically bank premises and marketable securities. The extent to which the revaluation reserves can be relied upon as a cushion for unexpected losses depends mainly upon the level of certainty that can be placed on estimates of the market values of the relevant assets, the subsequent deterioration in values under difficult market conditions or in a forced sale, potential for actual liquidation at those values, tax consequences of revaluation, etc. Therefore, it would be prudent to consider revaluation reserves at a discount of 55 percent while determining their value for inclusion in Tier II capital. Such reserves will have to be reflected on the face of the Balance Sheet as revaluation reserves.
iii) General provisions and loss reserves
Such reserves, if they are not attributable to the actual diminution in value or identifiable potential loss in any specific asset and are available to meet unexpected losses, can be included in Tier II capital. Adequate care must be taken to see that sufficient provisions have been made to meet all known losses and foreseeable potential losses before considering general provisions and loss reserves to be part of Tier II capital. General provisions/loss reserves will be admitted up to a maximum of 1.25 percent of total risk weighted assets.
'Floating Provisions' held by the banks which is general in nature and not made against any identified assets may be treated as a part of Tier II capital within the overall ceiling of 1.25 percent of total risk weighted assets, if such provisions are not reduced from gross NPA to arrive at the net NPA
iv) Hybrid debt capital instruments
In this category, fall a number of capital instruments, which combine certain characteristics of equity and certain characteristics of debt. Each has a particular feature, which can be considered to affect its quality as capital. Where these instruments have close similarities to equity, in particular when they are able to support losses on an ongoing basis without triggering liquidation, they may be included in Tier II capital.
v) Subordinated debt
(a) To be eligible for inclusion in Tier II capital, the instrument should be fully paid-up, unsecured, subordinated to the claims of other creditors, free of restrictive clauses, and should not be redeemable at the initiative of the holder or without the consent of the Reserve Bank of India. They often carry a fixed maturity, and as they approach maturity, they should be subjected to progressive discount, for inclusion in Tier II capital. Instruments with an initial maturity of less than 5 years or with a remaining maturity of one year should not be included as part of Tier II capital. Subordinated debt instruments eligible to be reckoned as Tier II capital will be limited to 50 percent of Tier I capital.
b) In the case of public sector banks, the bonds issued to the VRS employees as a part of the compensation package, net of the unamortised VRS Deferred Revenue Expenditure, could be treated as Tier II capital, subject to compliance with the terms and conditions stipulated in para 2.4 below.
c) The subordinated debt instruments included in Tier II capital may be subjected to discount at the rates shown below:
| Remaining Maturity of Instruments | Rate of Discount (%) |
| Less than one year | 100 |
| One year and more but less than two years | 80 |
| Two years and more but less than three years | 60 |
| Three years and more but less than four years | 40 |
| Four years and more but less than five years | 20 |
d) Banks should indicate the amount of subordinated debt raised as Tier II capital by way of explanatory notes/ remarks in the Balance Sheet as well as in Schedule 5 under 'Other Liabilities & Provisions'.
vi) Investment Fluctuation Reserve (IFR)
(a). IFR would continue to be treated as Tier II capital but would not be subject to the ceiling of 1.25 percent of the total risk weighted assets.
(b) With a view to encourage banks for early compliance with the guidelines for maintenance of capital charge for market risks, banks which have maintained capital of at least 9 percent of the risk weighted assets for both credit risks and market risks for both Held for Trading (HFT) and Available for Sale (AFS) category may transfer the balance in excess of 5 per cent of securities included under HFT and AFS categories to Statutory Reserve, which is eligible for inclusion in Tier I capital. This transfer shall be made as a ‘below the line’ in the Profit and Loss Appropriation Account.
(c) The provisions required to be created on account of depreciation in the AFS and HFT categories should be debited to the P&L Account and an equivalent amount (net of tax benefit, if any, and net of consequent reduction in the transfer to Statutory Reserve) or the balance available in excess of 5 per cent of securities included under the HFT / AFS categories in the Investment Fluctuation Reserve Account, whichever is less, may be transferred from the Investment Fluctuation Reserve Account to the P&L Account. This transfer shall be made as a ‘below the line’ in the Profit and Loss Appropriation account. The amount drawn down from the Investment Fluctuation Reserve will not be available to a bank for payment of dividend among the shareholders. Hence, the amount drawn down may be appropriated to the Statutory Reserve, which would be eligible to be reckoned as Tier 1 capital.
vii) Banks are allowed to include the ‘General Provisions on Standard Assets’ and ‘provisions held for country exposures’ in Tier II capital. However, the provisions on ‘standard assets together with other ‘general provisions/ loss reserves’ and ‘provisions held for country exposures’ will be admitted as Tier II capital up to a maximum of 1.25 per cent of the total risk-weighted assets.
2.1.6 Tier II elements should be limited to a maximum of 100 percent of total Tier I elements for the purpose of compliance with the norms.
2.1.7 Norms on cross holdings
(i) A bank’s / FI’s investments in all types of instruments listed at 2.1.7 (ii) below, which are issued by other banks / FIs and are eligible for capital status for the investee bank / FI, will be limited to 10 per cent of the investing bank's capital funds (Tier I plus Tier II capital).
(ii) Banks' / FIs' investment in the following instruments will be included in the prudential limit of 10 per cent referred to at 2.1.7(i) above.
a) Equity shares;
b) Preference shares eligible for capital status;
c) Subordinated debt instruments;
d) Hybrid debt capital instruments; and
e) Any other instrument approved as in the nature of capital.
(iii) Banks / FIs should not acquire any fresh stake in a bank's equity shares, if by such acquisition, the investing bank's / FI's holding exceeds 5 per cent of the investee bank's equity capital.
(iv) Banks’ / FIs’ investments in the equity capital of subsidiaries are at present deducted from their Tier I capital for capital adequacy purposes. Investments in the instruments issued by banks / FIs which are listed at paragraph 2.1.7(ii) above, which are not deducted from Tier I capital of the investing bank/ FI, will attract 100 per cent risk weight for credit risk for capital adequacy purposes.
Note:
Following investments are excluded from the purview of the ceiling of 10 percent prudential norm prescribed above:
a) Investments in equity shares of other banks /FIs in India held under the provisions of a statute.
b) Strategic investments in equity shares of other banks/FIs incorporated outside India as promoters/significant shareholders (i.e. Foreign Subsidiaries / Joint Ventures / Associates).
c) Equity holdings outside India in other banks / FIs incorporated outside India
2.2 Capital funds of foreign banks operating in India
For foreign banks, 'capital funds' would include the following elements:
2.2.1 Elements of Tier I capital
i) Interest-free funds from Head Office kept in a separate account in Indian books specifically for the purpose of meeting the capital adequacy norms.
ii) Statutory reserves kept in Indian books.
iii) Remittable surplus retained in Indian books which is not repatriable so long as the bank functions in India.
Notes:
a) The foreign banks are required to furnish to Reserve Bank, (if not already done), an undertaking to the effect that the banks will not remit abroad the remittable surplus retained in India and included in Tier I capital as long as the banks function in India.
b) These funds may be retained in a separate account titled as 'Amount Retained in India for Meeting Capital to Risk-weighted Asset Ratio (CRAR) Requirements' under 'Capital Funds'.
c) An auditor's certificate to the effect that these funds represent surplus remittable to Head Office once tax assessments are completed or tax appeals are decided and do not include funds in the nature of provisions towards tax or for any other contingency may also be furnished to Reserve Bank.
d) Foreign banks operating in India are permitted to hedge their entire Tier I capital held by them in Indian books subject to the following conditions:
(i) the forward contract should be for tenor of one year or more and may be rolled over on maturity. Rebooking of cancelled hedge will require prior approval of Reserve Bank.
(ii) the capital funds should be available in India to meet local regulatory and CRAR requirements. Therefore, foreign currency funds accruing out of hedging should not be parked in nostro accounts but should remain swapped with banks in India at all times.
iv) Capital reserve representing surplus arising out of sale of assets in India held in a separate account and which is not eligible for repatriation so long as the bank functions in India.
v) Interest-free funds remitted from abroad for the purpose of acquisition of property and held in a separate account in Indian books.
vi) The net credit balance, if any, in the inter-office account with Head Office/overseas branches will not be reckoned as capital funds. However, any debit balance in Head Office account will have to be set-off against the capital.
2.2.2 Elements of Tier II capital
To the extent relevant, elements of Tier II capital as indicated above in paragraph 2.1.5 in respect of Indian banks will be eligible.
2.2.3 The elements of Tier I & Tier II capital do not include foreign currency loans granted to Indian parties.
2.3 Minimum requirement of capital funds
Banks are required to maintain a minimum CRAR of 9 percent on an ongoing basis.
2.4 Issue of subordinated debt for raising Tier II capital
2.4.1 The Reserve Bank has given autonomy to Indian banks to raise rupee subordinated debt as Tier II capital, subject to the terms and conditions given in the Annexure 1. It should be ensured that the terms & conditions are strictly adhered to.
2.4.2 Foreign banks also would not require prior approval of RBI for raising subordinated debt in foreign currency through borrowings from Head Office for inclusion in Tier II capital. To ensure transparency and uniformity, detailed guidelines in this regard are given at Annexure 1A.
2.4.3 The banks should submit a report to Reserve Bank of India giving details of the Subordinated debt issued for raising Tier II capital, such as, amount raised, maturity of the instrument, rate of interest together with a copy of the offer document, soon after the issue is completed.
3. Risk adjusted assets and off-balance sheet items
3.1 Risk adjusted assets would mean weighted aggregate of funded and non-funded items. Degrees of credit risk expressed as percentage weightings, have been assigned to balance sheet assets and conversion factors to off-balance sheet items.
3.2 The banks’ overall minimum capital requirement will be the sum of:
(a) capital requirement for credit risk on all credit exposures excluding items comprising trading book as defined in para 4.5.1 and including counter party credit risk on all OTC derivatives on the basis of the risk weights indicated in Annexure 2 and
(b) capital requirement for market risks in the trading book.
3.3 The value of each asset/ item shall be multiplied by the relevant weights to produce risk adjusted values of assets and off-balance sheet items. The aggregate will be taken into account for reckoning the minimum capital ratio.
3.4 The risk-weights allotted to each of the items of assets and off-balance sheet items are furnished in the Annexure 2.
4. Capital charge for market risk
4.1 Introduction
The Basel Committee on Banking Supervision (BCBS) had issued the ‘Amendment to the Capital Accord to incorporate market risks’ containing comprehensive guidelines to provide explicit capital charge for market risks. Market risk is defined as the risk of losses in on-balance sheet and off-balance sheet positions arising from movements in market prices. The market risk positions subject to capital charge requirement are:
• The risks pertaining to interest rate related instruments and equities in the trading book; and
• Foreign exchange risk (including open position in precious metals) throughout the bank (both banking and trading books).
4.2 As an initial step towards prescribing capital requirement for market risks, banks were advised to:
i) assign an additional risk weight of 2.5 per cent on the entire investment portfolio;
ii) assign a risk weight of 100 per cent on the open position limits on foreign exchange and gold; and
iii) build up Investment Fluctuation Reserve up to a minimum of five per cent of the investments held in Held for Trading and Available for Sale categories in the investment portfolio.
4.3 The interim measures adopted in India represent a broad brush and simplistic approach. Besides, over a period of time, banks’ ability to identify and measure market risk has improved. Keeping in view the ability of banks to identify and measure market risk, it was decided to assign explicit capital charge for market risks. Banks are required to maintain capital charge for market risks in a phased manner over a two year period, as detailed below:
(a) Banks were required to maintain capital for market risks on securities included in the Held for Trading category, open gold position, open forex position, trading positions in derivatives and derivatives entered into for hedging trading book exposures by March 31, 2005. Consequently, the additional risk weight of 2.5% towards market risk on the investment included under Held for Trading category is not required.
(b) Banks should maintain capital for market risks on securities included in the Available for Sale category also by March 31, 2006. Consequently, the additional risk weight of 2.5% towards market risks maintained at present on the investment included under Available for Sale and Held to Maturity categories would not be required with effect from the above date or from an earlier date from which bank provides capital for market risk for securities held in the Available for Sale category.
4.4 The guidelines in this regard are organized under the following seven sections:
Section - Particulars
A - Scope and coverage of capital charge for market risks
B - Measurement of capital charge for interest rate risk in the trading book
C - Measurement of capital charge for equities in the trading book
D - Measurement of capital charge for foreign exchange risk and gold open positions
Section A
4.5 Scope and coverage of capital charge for market risks
General
4.5.1. These guidelines seek to address the issues involved in computing capital charges for interest rate related instruments in the trading book, equities in the trading book and foreign exchange risk (including gold and other precious metals) in both trading and banking books. Trading book for the purpose of these guidelines will include:
• Securities included under the Held for Trading category
• Securities included under the Available for Sale category
• Open gold position limits
• Open foreign exchange position limits
• Trading positions in derivatives, and
• Derivatives entered into for hedging trading book exposures.
4.5.2 To begin with, capital charge for market risks is applicable to banks on a global basis. At a later stage, this would be extended to all groups where the controlling entity is a bank.
4.5.3. Banks are required to manage the market risks in their books on an ongoing basis and ensure that the capital requirements for market risks are being maintained on a continuous basis, i.e. at the close of each business day. Banks are also required to maintain strict risk management systems to monitor and control intra-day exposures to market risks.
Section B
4.6 Measurement of capital charge for interest rate risk in the trading book
4.6.1 This section describes the framework for measuring the risk of holding or taking positions in debt securities and other interest rate related instruments in the domestic currency in the trading book.
4.6.2. The capital charge for interest rate related instruments and equities would apply to current market value of these items in bank’s trading book. The current market value will be determined as per extant RBI guidelines on valuation of investments.
4.6.3 The minimum capital requirement is expressed in terms of two separately calculated charges,
(i) “specific risk” charge for each security, which is akin to the conventional capital charge for credit risk, both for short (short position is not allowed in India except in derivatives) and long positions, and
(ii) “general market risk” charge towards interest rate risk in the portfolio, where long and short positions (which is not allowed in India except in derivatives) in different securities or instruments can be offset.
Specific risk
4.6.4 The capital charge for specific risk is designed to protect against an adverse movement in the price of an individual security owing to factors related to the individual issuer. The specific risk charge is graduated for various exposures as follows:
| Sr.No. | Nature of investment | Maturity | Specific risk capital charge (as % of exposure) |
| | Claims on Government | | |
| 1. | Investments in Government Securities. | All | 0.0 |
| 2. | Investments in other approved securities guaranteed by Central/ State Government. | All | 0.0 |
| 3. | Investments in other securities where payment of interest and repayment of principal are guaranteed by Central Govt. (This will include investments in Indira/Kisan Vikas Patra (IVP/KVP) and investments in Bonds and Debentures where payment of interest and principal is guaranteed by Central Govt.) | All | 0.0 |
| 4. | Investments in other securities where payment of interest and repayment of principal are guaranteed by State Governments. | All | 0.0 |
| 5. | Investments in other approved securities where payment of interest and repayment of principal are not guaranteed by Central/State Govt. | All | 1.80 |
| 6. | Investments in Government guaranteed securities of Government Undertakings which do not form part of the approved market borrowing programme. | All | 1.80 |
| 7. | Investment in state government guaranteed securities included under items 2, 4 and 6 above where the investment is nonperforming. However the banks need to maintain capital at 9.0% only on those State Government guaranteed securities issued by the defaulting entities and not on all the securities issued or guaranteed by that State Government. | All | 9.00 |
| | Claims on Banks | | |
| 8 | Claims on banks, including investments in securities which are guaranteed by banks as to payment of interest and repayment of principal | For residual term to final maturity 6 months or less | 0.30 |
| For residual term to final maturity between 6 and 24 months | 1.125 |
| For residual term to final maturity exceeding 24 months | 1.80 |
| 9. | Investments in subordinated debt instruments and bonds issued by other banks for their Tier II capital. | All | 9.00 |
| | Claims on Others | | |
| 10. | Investment in Mortgage Backed Securities (MBS) of residential assets of Housing Finance Companies (HFCs) which are recognised and supervised by National Housing Bank (subject to satisfying terms & conditions given in Annexure 2B). | All | 6.75 |
| 11. | Investment in securitised paper pertaining to an infrastructure facility. (subject to satisfying terms & conditions given in Annexure 3). | All | 4.50 |
| 12. | All other investments | All | 9.00 |
4.6.5. The category ‘claim on government’ will include all forms of government securities including dated Government securities, Treasury bills and other short-term investments and instruments where repayment of both principal and interest are fully guaranteed by the Government. The category 'Claims on Others' will include issuers of securities other than Government and banks.
General Market Risk
4.6.6. The capital requirements for general market risk are designed to capture the risk of loss arising from changes in market interest rates. The capital charge is the sum of four components:
• the net short (short position is not allowed in India except in derivatives) or long position in the whole trading book;
• a small proportion of the matched positions in each time-band (the “vertical disallowance”);
• a larger proportion of the matched positions across different time-bands (the “horizontal disallowance”), and
• a net charge for positions in options, where appropriate.
4.6.7. The Basle Committee has suggested two broad methodologies for computation of capital charge for market risks. One is the standardised method and the other is the banks’ internal risk management models method. As banks in India are still in a nascent stage of developing internal risk management models, it has been decided that, to start with, banks may adopt the standardised method.
Under the standardised method there are two principal methods of measuring market risk, a “maturity” method and a “duration” method. As “duration” method is a more accurate method of measuring interest rate risk, it has been decided to adopt standardised duration method to arrive at the capital charge. Accordingly, banks are required to measure the general market risk charge by calculating the price sensitivity (modified duration) of each position separately. Under this method, the mechanics are as follows:
• first calculate the price sensitivity (modified duration) of each instrument;
• next apply the assumed change in yield to the modified duration of each instrument between 0.6 and 1.0 percentage points depending on the maturity of the instrument (see Table-1 below);
• slot the resulting capital charge measures into a maturity ladder with the fifteen time bands as set out in Table-1;
• subject long and short positions (short position is not allowed in India except in derivatives) in each time band to a 5 per cent vertical disallowance designed to capture basis risk; and
• carry forward the net positions in each time-band for horizontal offsetting subject to the disallowances set out in Table-2.
Table 1
Duration method-time bands and assumed changes in yield| Time Bands | Assumed Change in Yield |
| Zone 1 | |
| 1 month or less | 1.00 |
| 1 to 3 months | 1.00 |
| 3 to 6 months | 1.00 |
| 6 to 12 months | 1.00 |
| Zone 2 | |
| 1.0 to 1.9 years | 0.90 |
| 1.9 to 2.8 years | 0.80 |
| 2.8 to 3.6 years | 0.75 |
| Zone 3 | |
| 3.6 to 4.3 years | 0.75 |
| 4.3 to 5.7 years | 0.70 |
| 5.7 to 7.3 years | 0.65 |
| 7.3 to 9.3 years | 0.60 |
| 9.3 to 10.6 years | 0.60 |
| 10.6 to 12 years | 0.60 |
| 12 to 20 years | 0.60 |
| over 20 years | 0.60 |
Table 2
Horizontal Disallowances| Zones | Time band | Within the zones | Between adjacent zones | Between zones 1 and 3 |
| Zone 1 | 1 month or less
1 to 3 months
3 to 6 months
6 to 12 months | 40% |
40%
40% |
100% |
| Zone 2 | 1.0 to 1.9 years
1.9 to 2.8 years
2.8 to 3.6 years | 30% |
| Zone 3 | 3.6 to 4.3 years
4.3 to 5.7 years
5.7 to 7.3 years
7.3 to 9.3 years
9.3 to 10.6 years
10.6 to 12 years
12 to 20 years
over 20 years | 30% |
Capital charge for interest rate derivatives
4.6.8 The measurement of capital charge for market risks should include all interest rate derivatives and off-balance sheet instruments in the trading book and derivatives entered into for hedging trading book exposures which would react to changes in the interest rates, like FRAs, interest rate positions etc. The details of measurement of capital charge for interest rate derivatives are furnished in Attachment I. Details of computing capital charges for market risks in major currencies are detailed in Attachment II. In the case of residual currencies the gross positions in each time-band will be subject to the assumed change in yield set out in Table-1 with no further offsets.
4.6.9 Two examples for computing capital charge for market risks, including the vertical and horizontal disallowances are given in Para 7 below.
Section C
4.7 Measurement of capital charge for equities in the trading book
4.7.1 Minimum capital requirement to cover the risk of holding or taking positions in equities in the trading book is set out below. This is applied to all instruments that exhibit market behaviour similar to equities but not to nonconvertible preference shares (which are covered by the interest rate risk requirements described earlier). The instruments covered include equity shares, whether voting or non-voting, convertible securities that behave like equities, for example: units of mutual funds, and commitments to buy or sell equity.
Specific and general market risk
4.7.2 Capital charge for specific risk (akin to credit risk) will be 9% and specific risk is computed on the banks’ gross equity positions (i.e. the sum of all long equity positions and of all short equity positions-short equity position is, however, not allowed for banks in India). The general market risk charge will also be 9% on the gross equity positions.
Section D
4.8. Measurement of capital charge for foreign exchange and gold open positions
4.8.1 Foreign exchange open positions and gold open positions are at present risk-weighted at 100%. Thus, capital charge for foreign exchange and gold open position is 9% at present. These open positions, limits or actual whichever is higher, would continue to attract capital charge at 9%. This is in line with the Basel Committee requirement.
5. Capital Adequacy for Subsidiaries
5.1 The Basel Committee on Banking Supervision has proposed that the New Capital Adequacy Framework should be extended to include, on a consolidated basis, holding companies that are parents of banking groups. On prudential considerations, it is necessary to adopt best practices in line with international standards, while duly reflecting local conditions.
5.2 Accordingly, banks may voluntarily build-in the risk weighted components of their subsidiaries into their own balance sheet on notional basis, at par with the risk weights applicable to the bank's own assets. Banks should earmark additional capital in their books over a period of time so as to obviate the possibility of impairment to their net worth when switchover to unified balance sheet for the group as a whole is adopted after sometime. The additional capital required may be provided in the bank's books in phases, beginning from the year ended March 2001.
5.3 A Consolidated bank defined as a group of entities which include a licensed bank should maintain a minimum Capital to Risk-weighted Assets Ratio (CRAR) as applicable to the parent bank on an ongoing basis from the year ended 31 March 2003. While computing capital funds, parent bank may consider the following points :
(i) Banks are required to maintain a minimum capital to risk weighted assets ratio of 9%. Non-bank subsidiaries are required to maintain the capital adequacy ratio prescribed by their respective regulators. In case of any shortfall in the capital adequacy ratio of any of the subsidiaries, the parent should maintain capital in addition to its own regulatory requirements to cover the shortfall.
(ii) Risks inherent in deconsolidated entities (i.e., entities which are not consolidated in the Consolidated Prudential Reports) in the group need to be assessed and any shortfall in the regulatory capital in the deconsolidated entities should be deducted (in equal proportion from Tier 1 and Tier 2 capital) from the consolidated bank's capital in the proportion of its equity stake in the entity.
6. Procedure
6.1 While calculating the aggregate of funded and non-funded exposure of a borrower for the purpose of assignment of risk weight, banks may ‘net-off’ against the total outstanding exposure of the borrower -
(a) advances collateralised by cash margins or deposits,
(b) credit balances in current or other accounts which are not earmarked for specific purposes and free from any lien,
(c) in respect of any assets where provisions for depreciation or for bad debts have been made
(d) claims received from DICGC/ ECGC and kept in a separate account pending adjustment, and
(e) subsidies received against advances in respect of Government sponsored schemes and kept in a separate account.
6.2 After applying the conversion factor as indicated in Annexure 2, the adjusted off Balance Sheet value shall again be multiplied by the risk weight attributable to the relevant counter-party as specified.
6.3 Foreign exchange contracts with an original maturity of 14 calendar days or less, irrespective of the counterparty, may be assigned "zero" risk weight as per international practice.
6.4 Foreign Exchange and Interest Rate related Contracts
(i) Foreign exchange contracts include the following:
(a) Cross currency interest rate swaps
(b) Forward foreign exchange contracts
(c) Currency futures
(d) Currency options purchased
(e) Other contracts of a similar nature
(ii) As in the case of other off-Balance Sheet items, a two stage calculation prescribed below shall be applied:
(a) Step 1 - The notional principal amount of each instrument is multiplied by the conversion factor given below:
| Original Maturity | Conversion Factor |
| Less than one year | 2% |
| One year and less than two years | 5%
(i.e. 2% + 3%) |
| For each additional year | 3% |
(b) Step 2 - The adjusted value thus obtained shall be multiplied by the risk weightage allotted to the relevant counter-party as given in IIA and above.
(iii) Interest rate contracts include the following:
(a) Single currency interest rate swaps
(b) Basis swaps
(c) Forward rate agreements
(d) Interest rate futures
(e) Interest rate options purchased
(f) Other contracts of a similar nature
(iv) As in the case of other off-Balance Sheet items, a two stage calculation prescribed below shall be applied:
(a) Step 1 - The notional principal amount of each instrument is multiplied by the percentages given below:
| Original Maturity | Conversion Factor |
| Less than one year | 0.5% |
| One year and less than two years | 1.0% |
| For each additional year | 1.0% |
(b) Step 2 - The adjusted value thus obtained shall be multiplied by the risk weightage allotted to the relevant counter-party as given in IIA above.
6.5 Aggregation of capital charge for market risks
Calculation of the risk-weighted assets for market risk
6.5.1. As explained earlier capital charges for specific risk and general market risk are to be computed separately before aggregation. For computing the total capital charge for market risks, the calculations may be plotted in the following table:
Proforma 1
(Rs. in crore)
| Risk Category | Capital charge |
| I. Interest Rate (a+b) | |
| a. General market risk | |
| • Net position (parallel shift) | |
| • Horizontal disallowance (curvature) | |
| • Vertical disallowance (basis) | |
| • Options | |
| b. Specific risk | |
| II. Equity (a+b) | |
| a. General market risk | |
| b. Specific risk | |
| III. Foreign Exchange & Gold | |
| IV.Total capital charge for market risks (I+II+III) | |
6.5.2 Calculation of total risk-weighted assets and capital ratio
a) Arrive at the risk weighted assets for credit risk in the banking book and for counterparty credit risk on all OTC derivatives.
b) Convert the capital charge for market risk to notional risk weighted assets by multiplying the capital charge arrived at as above in Proforma-1 by 100 ÷ 9 [the present requirement of CRAR is 9% and hence notional risk weighted assets are arrived at by multiplying the capital charge by (100 ÷ 9)]
c) Add the risk-weighted assets for credit risk as at (a) above and notional risk-weighted assets of trading book as at (b) above to arrive at total risk weighted assets for the bank.
d) Compute capital ratio on the basis of regulatory capital maintained and risk-weighted assets.
Computation of capital available for market risk:
6.5.3 Capital required for supporting credit risk should be deducted from total capital funds to arrive at capital available for supporting market risk. This is illustrated below:
Illustration 1
(Rs. in Crore)
| 1 | Capital funds
• Tier I capital -------------------------------------------------
• Tier II capital ------------------------------------------------ |
55
50 | 105 |
| 2 | Total risk weighted assets
• RWA for credit risk ----------------------------------------
• RWA for market risk -------------------------------------- |
1000
140 | 1140 |
| 3 | Total CRAR | | 9.21 |
| 4 | Minimum capital required to support credit risk (1000*9%)
• Tier I - 45 (@ 4.5% of 1000) ---------------------------
• Tier II - 45 (@ 4.5% of 1000) -------------------------- |
45
45 | 90 |
| 5 | Capital available to support market risk (105 - 90)
• Tier I - (55 - 45) -------------------------------------------
• Tier II - (50 - 45) ------------------------------------------ |
10
5 | 15 |
7. Worked out examples for computing capital charge for credit and market risks
7.1. Example indicating computation of capital charge for credit and market risks
– without equities and interest rate related derivative instruments is given below:
7.1.1 A bank may have the following position:
| Sl.No | Details | Amount
Rs. Crore |
| 1 | Cash & Balances with RBI | 200.00 |
| 2 | Bank balances | 200.00 |
| 3 | Investments: | |
| Held for Trading | 500.00 |
| Available for Sale | 1000.00 |
| Held to Maturity | 500.00 |
| 4 | Advances (net) | 2000.00 |
| 5 | Other Assets | 300.00 |
| 6 | Total Assets | 4700.00 |
7.1.2 In terms of counter party, the investments are assumed to be as under:
Government - Rs.1000 crore
Banks - Rs. 500 crore
Others - Rs. 500 crore
For simplicity sake let us assume the details of investments as under:
Government securities
| Date of Issue | Date of reporting | Maturity Date | Amount Rs.in crore | Coupon (%) | Type |
| 01/03/1992 | 31/03/2003 | 01/03/2004 | 100 | 12.50 | AFS |
| 01/05/1993 | 31/03/2003 | 01/05/2003 | 100 | 12.00 | AFS |
| 01/03/1994 | 31/03/2003 | 31/05/2003 | 100 | 12.00 | AFS |
| 01/03/1995 | 31/03/2003 | 01/03/2015 | 100 | 12.00 | AFS |
| 01/03/1998 | 31/03/2003 | 01/03/2010 | 100 | 11.50 | AFS |
| 01/03/1999 | 31/03/2003 | 01/03/2009 | 100 | 11.00 | AFS |
| 01/03/2000 | 31/03/2003 | 01/03/2005 | 100 | 10.50 | HFT |
| 01/03/2001 | 31/03/2003 | 01/03/2006 | 100 | 10.00 | HTM |
| 01/03/2002 | 31/03/2003 | 01/03/2012 | 100 | 8.00 | HTM |
| 01/03/2003 | 31/03/2003 | 01/03/2023 | 100 | 6.50 | HTM |
| Total | | | 1000 | | |
Bank Bonds
| Date of Issue | Date of reporting | Maturity Date | Amount Rs. in crore | Coupon (%) | Type |
| 01/03/1992 | 31/03/2003 | 01/03/2004 | 100 | 12.50 | AFS |
| 01/05/1993 | 31/03/2003 | 01/05/2003 | 100 | 12.00 | AFS |
| 01/03/1994 | 31/03/2003 | 31/05/2003 | 100 | 12.00 | AFS |
| 01/03/1995 | 31/03/2003 | 01/03/2006 | 100 | 12.50 | AFS |
| 01/03/1998 | 31/03/2003 | 01/03/2007 | 100 | 11.50 | HFT |
| Total | | | 500 | | |
Others
| Date of Issue | Date of reporting | Maturity Date | Amount Rs. in crore | Coupon (%) | Type |
| 01/03/1992 | 31/03/2003 | 01/03/2004 | 100 | 12.50 | HFT |
| 01/05/1993 | 31/03/2003 | 01/05/2003 | 100 | 12.00 | HFT |
| 01/03/1994 | 31/03/2003 | 31/05/2003 | 100 | 12.00 | HFT |
| 01/03/1995 | 31/03/2003 | 01/03/2006 | 100 | 12.50 | HTM |
| 01/03/1998 | 31/03/2003 | 01/03/2017 | 100 | 11.50 | HTM |
| Total | | | 500 | | |
7.1.3 Computation of risk weighted assets
A. Risk weighted assets for credit risk
As per the guidelines, held for trading and available for sale securities would qualify to be categorized as Trading Book. Thus trading book in the instant case would be Rs.1500 crore. While computing the credit risk, the securities held under trading book would be excluded and hence the credit risk based risk-weights would be as under:
(Rs. in crore)
| Sl.No. | Details of Assets | Book Value | Risk Weight (%) | Risk weighted Assets |
| 1 | Cash & balances with RBI | 200 | 0 | 0 |
| 2 | Bank balances | 200 | 20 | 40 |
| 3 | Investments:
Government
Banks
Others |
300
0
200 |
0
20
100 |
0
0
200 |
| 4 | Advances (net) | 2000 | 100 | 2000 |
| 5 | Other Assets | 300 | 100 | 300 |
| 6 | Total Assets | 3200 | | |
| 7 | Total RWAs | | | 2540 |
B. Risk weighted assets for market risk
Computation of capital charge for Trading Book:
a. Specific Risk
(i) Government securities: Rs.700 crore-Nil
(ii) Banks :
(Rs. in crore)
| Details | Capital charge | Amount | Capital charge |
| For residual term to final maturity 6 months or less | 0.30% | 200 | 0.60 |
| For residual term to final maturity between 6 and 24 months | 1.125% | 100 | 1.125 |
| For residual term to final maturity exceeding 24 months | 1.80% | 200 | 3.60 |
| Total | | 500 | 5.325 |
(iii) Others : Rs.300 crore @ 9% =Rs. 27 crore
(i)+(ii)+(iii) = Rs.0 crore+Rs.5.325 crore + Rs.27 crore = Rs. 32.325 crore
Therefore, capital charge for specific risk in trading book is Rs.32.33 crore.
b. General Market Risk
Modified duration is used to arrive at the price sensitivity of an interest rate related instrument.
For all the securities listed below, date of reporting is taken as 31/3/2003.
(Rs. in crore)
| Counter Party | Maturity Date | Amount (market value) | Coupon (%) | Capital Charge for general market risk |
| Govt. | 01/03/2004 | 100 | 12.50 | 0.84 |
| Govt. | 01/05/2003 | 100 | 12.00 | 0.08 |
| Govt. | 31/05/2003 | 100 | 12.00 | 0.16 |
| Govt. | 01/03/2015 | 100 | 12.50 | 3.63 |
| Govt. | 01/03/2010 | 100 | 11.50 | 2.79 |
| Govt. | 01/03/2009 | 100 | 11.00 | 2.75 |
| Govt. | 01/03/2005 | 100 | 10.50 | 1.35 |
| Banks | 01/03/2004 | 100 | 12.50 | 0.84 |
| Banks | 01/05/2003 | 100 | 12.00 | 0.08 |
| Banks | 31/05/2003 | 100 | 12.00 | 0.16 |
| Banks | 01/03/2006 | 100 | 12.50 | 1.77 |
| Banks | 01/03/2007 | 100 | 11.50 | 2.29 |
| Others | 01/03/2004 | 100 | 12.50 | 0.84 |
| Others | 01/05/2003 | 100 | 12.00 | 0.08 |
| Others | 31/05/2003 | 100 | 12.00 | 0.16 |
| | Total | 1500 | | 17.82 |
c. Adding the capital charges for specific risk as well as general market risk would give the total capital charge for the trading book of interest rate related instruments. Therefore, capital charge for Market Risks = Rs.32.33 crore + Rs.17.82 crore, i.e., Rs.50.15 crore.
d. To facilitate computation of CRAR for the whole book, this capital charge needs to be converted into equivalent risk weighted assets. In India, the minimum CRAR is 9%. Hence, the capital charge could be converted to risk weighted assets by multiplying the capital charge by (100 ÷ 9), Thus risk weighted assets for market risk is 50.15*(100 ÷ 9) = Rs.557.23 crore.
7.1.4 Computing the capital ratio:
(Rs. in Crore)
| 1 | Total Capital | 400 |
| 2 | Risk weighted assets for Credit Risk | 2540.00 |
| 3 | Risk weighted assets for Market Risk | 557.23 |
| 4 | Total Risk weighted assets (2+3) | 3097.23 |
| 5 | CRAR [(1÷4)*100] | 12.91 % |
7.2 Example indicating computation of capital charge for credit and market risks-with equities and interest rate related derivative instruments. Foreign exchange and gold open positions also have been assumed.
7.2.1 A bank may have the following position:
| Sl. No | Details | Amount Rs. Crore |
| 1 | Cash & Balances with | 200.00 |
| 2 | Bank balances | 200.00 |
| 3 | Investments:
Held for Trading
Available for Sale
Held to Maturity
Equities |
500.00
1000.00
500.00
300.00 |
| 4 | Advances (net) | 2000.00 |
| 5 | Other Assets | 300.00 |
| 6 | Total Assets | 5000.00 |
In addition,
(a) foreign exchange open position limit is assumed as Rs.60 crore and
(b) Gold open position is assumed at Rs.40 crore.
(c) Let us also assume that the bank is having the following positions in interest rate related derivatives:
(i) Interest Rate Swaps (IRS), Rs.100 crore-bank received floating rate interest and pays fixed, next interest fixing after 6 months, residual life of swap 8 years, and
(ii) Long position in interest rate future (IRF), Rs.50 crore, delivery after 6 months, life of underlying government security 3.5 years.
7.2.2 In terms of counter party the investments are assumed to be as under:
a) Interest rate related securities
Government - Rs.1000 crore
Banks - Rs. 500 crore
Others - Rs. 500 crore
b) Equities
Others - Rs.300 crore
For simplicity sake let us assume the details of investments in interest rate related securities as under:
Government securities
| Date of Issue | Date of reporting | Maturity Date | Amount Rs.crore | Coupon (%) | Type |
| 01/03/1992 | 31/03/2003 | 01/03/2004 | 100 | 12.50 | AFS |
| 01/05/1993 | 31/03/2003 | 01/05/2003 | 100 | 12.00 | AFS |
| 01/03/1994 | 31/03/2003 | 31/05/2003 | 100 | 12.00 | AFS |
| 01/03/1995 | 31/03/2003 | 01/03/2015 | 100 | 12.50 | AFS |
| 01/03/1998 | 31/03/2003 | 01/03/2010 | 100 | 11.50 | AFS |
| 01/03/1999 | 31/03/2003 | 01/03/2009 | 100 | 11.00 | AFS |
| 01/03/2000 | 31/03/2003 | 01/03/2005 | 100 | 10.50 | HFT |
| 01/03/2001 | 31/03/2003 | 01/03/2006 | 100 | 10.00 | HTM |
| 01/03/2002 | 31/03/2003 | 01/03/2012 | 100 | 8.00 | HTM |
| 01/03/2003 | 31/03/2003 | 01/03/2023 | 100 | 6.50 | HTM |
| Total | | | 1000 | | |
Bank Bonds
| Date of Issue | Date of reporting | Maturity Date | Amount Rs.crore | Coupon (%) | Type |
| 01/03/1992 | 31/03/2003 | 01/03/2004 | 100 | 12.50 | AFS |
| 01/05/1993 | 31/03/2003 | 01/05/2003 | 100 | 12.00 | AFS |
| 01/03/1994 | 31/03/2003 | 31/05/2003 | 100 | 12.00 | AFS |
| 01/03/1995 | 31/03/2003 | 01/03/2006 | 100 | 12.50 | AFS |
| 01/03/1998 | 31/03/2003 | 01/03/2007 | 100 | 11.50 | HFT |
| Total | | | 500 | | |
Others
| Date of Issue | Date of reporting | Maturity Date | Amount Rs.crore | Coupon (%) | Type |
| 01/03/1992 | 31/03/2003 | 01/03/2004 | 100 | 12.50 | HFT |
| 01/05/1993 | 31/03/2003 | 01/05/2003 | 100 | 12.00 | HFT |
| 01/03/1994 | 31/03/2003 | 31/05/2003 | 100 | 12.00 | HFT |
| 01/03/1995 | 31/03/2003 | 01/03/2006 | 100 | 12.50 | HTM |
| 01/03/1998 | 31/03/2003 | 01/03/2017 | 100 | 11.50 | HTM |
| Total | | | 500 | | |
7.2.3 Computation of risk weighted assets
A. Risk weighted assets for credit risk
As per the guidelines, held for trading and available for sale securities would qualify to be categorized as Trading Book. Thus trading book in respect of interest rate related investments in the instant case would be Rs.1500 crore. In addition, equities position of Rs.300 crore would be in the trading book. The derivative products held by banks are to be considered as part of trading book. Open position on foreign exchange and gold also would be considered for market risk. While computing the capital charge for credit risk, the securities held under trading book would be excluded and hence the credit risk based risk-weights would be as under:
(Rs. in crore)
| Details of Assets | Book Value | Risk Weight | Risk weighted Assets |
| Cash & RBI | 200 | 0% | 0 |
| Bank balances | 200 | 20% | 40 |
Investments in (HTM category)
Government
Banks
Others |
300
0
200 |
0%
20%
100% |
0
0
200 |
| Advances (net) | 2000 | 100% | 2000 |
| Other Assets | 300 | 100% | 300 |
| Total | 4700 | | 2540 |
| Credit Risk for OTC Derivaties: | | | |
| IRS | 100 | 1% + 1% per year and 100% RW | 8.00 |
| IRF | 50 | 4.00 |
| Total | 4850 | | 2552.00 |
B. Risk weighted assets for market risk
Computation of capital charge for the Trading Book:
a. Specific Risk
1. Investments in interest rate related instruments:
(i) Government securities-Rs.700 crore-Nil
(ii) Banks
(Rs.crore)
| Details | Capital charge | Amount | Capital Charge |
| For residual term to final maturity 6 months or less | 0.30% | 200 | 0.60 |
| For residual term to final maturity between 6 and 24 months | 1.125% | 100 | 1.125 |
| For residual term to final maturity exceeding 24 months | 1.80% | 200 | 3.60 |
| Total | | 500 | 5.325 |
(iii) Others Rs.300 crore @ 9% = Rs.27 crore
(i)+(ii)+(iii) = Rs.0 crore+Rs.5.325 crore+Rs.27 crore = Rs.32.325 crore
2. Equities-capital charge of 9% - Rs.27 crore
Therefore, capital charge for specific risk in the trading book is Rs. 59.33 crore (Rs. 32.33 crore + Rs. 27 crore).
b. General Market Risk
(1). Investments in interest rate related instruments:
Modified duration is used to arrive at the price sensitivity of an interest rate related instrument.
For all the securities listed below, date of reporting is taken as 31/3/2003
(Rs.crore)
| Counter Party | Maturity Date | Amount market value | Coupon(%) | Capital charge for general market risk |
| Govt. | 01/03/2004 | 100 | 12.50 | 0.84 |
| Govt. | 01/05/2003 | 100 | 12.00 | 0.08 |
| Govt. | 31/05/2003 | 100 | 12.00 | 0.16 |
| Govt. | 01/03/2015 | 100 | 12.50 | 3.63 |
| Govt. | 01/03/2010 | 100 | 11.50 | 2.79 |
| Govt. | 01/03/2009 | 100 | 11.00 | 2.75 |
| Govt. | 01/03/2005 | 100 | 10.50 | 1.35 |
| Banks | 01/03/2004 | 100 | 12.50 | 0.84 |
| Banks | 01/05/2003 | 100 | 12.00 | 0.08 |
| Banks | 31/05/2003 | 100 | 12.00 | 0.16 |
| Banks | 01/03/2006 | 100 | 12.50 | 1.77 |
| Banks | 01/03/2007 | 100 | 11.50 | 2.29 |
| Others | 01/03/2004 | 100 | 12.50 | 0.84 |
| Others | 01/05/2003 | 100 | 12.00 | 0.08 |
| Others | 31/05/2003 | 100 | 12.00 | 0.16 |
| | Total | 1500 | | 17.82 |
(2) Positions in interest rate related derivatives
Interest rate swap
| | Counter Party | Maturity Date | Notional Amount (i.e.,market value) | Modified duration or price sensitivity | Assumed change in yield | Capital charge |
| GOI | 30/09/2003 | 100 | 0.47 | 1.00 | 0.47 |
| GOI | 31/03/2011 | 100 | 5.14 | 0.60 | (-) 3.08
(-) 2.61 |
| GOI | 30/09/2003 | 50 | 0.45 | 1.00 | (-) 0.45 |
| GOI | 31/03/2007 | 50 | 2.84 | 0.75 | 2.13
1.68 |
(3) Disallowances
The price sensitivities calculated as above have been slotted into a durationbased ladder with fifteen time-bands (Attachment III). Long and short positions within a time band have been subjected to vertical disallowance of 5%. In the instant case, vertical disallowance is applicable under 3-6 month time band and 7.3-9.3 year time band. Then, net positions in each time band have been computed for horizontal offsetting subject to the disallowances mentioned in the table. In the instant case, horizontal disallowance is applicable only in respect of Zone 3. Horizontal disallowances in respect of adjacent zones are not applicable in the instant case.
(4) The total capital charge in this example for general market risk for interest rate related instruments is computed as under:
| Sl. No | Capital charge | Amount (Rs.) |
| 1 | For the vertical disallowance (under 3-6 month time band) | 2,25,000 |
| 2 | For the vertical disallowance (under 7.3-9.3 year time band) | 13,95,000 |
| 3 | For the horizontal disallowance (under Zone 3) | 9,00,000 |
| 4 | For the horizontal disallowances between adjacent zones | 0 |
| 5 | For the overall net open position (17.82-2.61 + 1.68) | 16,89,00,000 |
| 6 | Total capital charge for general market risk on interest rate related instruments (1 + 2 + 3 + 4 + 5) | 17,14,00,000 |
(5) Equities
Capital charge for General Market Risk for equities is 9%. Thus, general market risk capital charge on equities would work out to Rs.27 crore.
(6) Forex / Gold Open Position
Capital charge on forex/gold position would be computed at 9%. Thus the same works out to Rs.9 crore
(7) Capital charge for market risks in this example is computed as under:
(Rs. crore)
| Details | Capital charge for Specific Risk | Capital charge for General Market Risk |
| Interest Rate Related | 32.33 | 17.14 |
| Equities | 27.00 | 27.00 |
| Forex/Gold | | 9.00 |
| Total | 59.33 | 53.14 |
Total capital charge for specific risk and general market risk: Rs. 112.47 crore.
Computing Capital Ratio
7.2.4 To facilitate computation of CRAR for the whole book, this capital charge for market risks in the Trading Book needs to be converted into equivalent risk weighted assets. As in India, a CRAR of 9% is required, the capital charge could be converted to risk weighted assets by multiplying the capital charge by (100 ÷ 9), i.e. Rs. 112.47*(100 ÷ 9) = Rs. 1249.67 crore. Therefore, risk weight for market risk is : Rs. 1249.67 crore.
(Rs. Crore)
| 1 | Total Capital | 400 |
| 2 | Risk weighted assets for Credit Risk | 2552.00 |
| 3 | Risk weighted assets for Market Risk | 1249.67 |
| 4 | Total Risk weighted assets (2+3) | 3801.67 |
| 5 | CRAR [(1÷4)*100] | 10.52 % |
8. Reporting Formats
8.1 Reporting format for the purpose of monitoring the capital ratio is given hereunder:
Name of bank: _____________________ Position as on: _____________
A. Capital Base (Rs. in crore)
| Sl. No. | Details | Amount |
| A1. | Tier I Capital | |
| A2. | Tier II Capital | |
| A3. | Total Regulatory Capital | |
B. Risk Weighted Assets
| B1. | Risk Weighted Assets on Banking Book
a) On-balance sheet assets
b) Contingent Credits
c) Forex contracts
d) Other off-balance sheet items
Total | _______________________
_______________________
_______________________
_______________________
_______________________
_______________________
|
| B2. | Risk Weighted Assets on Trading Book
a) Capital charge on account of Specific Risk
i) On interest rate related instruments
ii) On Equities
Sub-total
b) Capital charge on account of general market risk
i) On interest rate related instruments
ii) On Equities
iii) On Foreign Exchange and gold open positions
Sub-total
Total Capital Charge on Trading Book
Total Risk weighted Assets on Trading Book
(total capital charge on trading book * (100/9))
| AFS | Other trading book exposures | Total |
| B3. | Total Risk Weighted Assets (B1 + B2) | |
C. Capital Ratio
| C1 | Capital to Risk-weighted Assets Ratio (CRAR)
(A3/B3*100) | |
D. Memo items
| D1 | Investment Fluctuation Reserve | |
| D2 | Book value of securities held in HFT category | |
| D3 | Book value of securities held in AFS category | |
| D4 | Net unrealised gains in HFT category | |
| D5 | Net unrealised gains in AFS category | |
8.2 Banks should furnish data in the above format as on the last day of each calendar quarter to the Chief General Manager-in-Charge, Department of Banking Supervision, Central Office, World Trade Centre I, 3rd floor, Cuffe Parade, Mumbai 400 005 both in hard copy and soft copy. Soft copy in excel format may also be forwarded through e-mail to osmos@rbi.org.in and dbodmrg@rbi.org.in.
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