<P> Capital Adequacy Ratio (CAR) is also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is the ratio of a bank's capital to its risk . National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements . </P> <P> It is a measure of a bank's capital . It is expressed as a percentage of a bank's risk weighted credit exposures . </P> <P> The enforcement of regulated levels of this ratio is intended to protect depositors and promote stability and efficiency of financial systems around the world . </P> <P> Two types of capital are measured: tier one capital, which can absorb losses without a bank being required to cease trading, and tier two capital, which can absorb losses in the event of a winding - up and so provides a lesser degree of protection to depositors . </P>

How to calculate capital adequacy ratio for banks in india