{"id":91541,"date":"2025-06-01T10:59:40","date_gmt":"2025-06-01T10:59:40","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91541"},"modified":"2025-06-01T10:59:40","modified_gmt":"2025-06-01T10:59:40","slug":"consider-the-following-statements-1-capital-adequacy-ratio-car","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/","title":{"rendered":"Consider the following statements :\n  1. Capital Adequacy Ratio (CAR)"},"content":{"rendered":"<p>Consider the following statements :<\/p>\n<ul>\n<li>1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues.<\/li>\n<li>2. CAR is decided by each individual bank.<\/li>\n<\/ul>\n<p>Which of the statements given above is\/are correct ?<\/p>\n<p>[amp_mcq option1=&#8221;1 only&#8221; option2=&#8221;2 only&#8221; option3=&#8221;Both 1 and 2&#8243; option4=&#8221;Neither 1 nor 2&#8243; correct=&#8221;option1&#8243;]<\/p>\n<div class=\"psc-box-pyq-exam-year-detail\">\n<div class=\"pyq-exam\">\n<div class=\"psc-heading\">This question was previously asked in<\/div>\n<div class=\"psc-title line-ellipsis\">UPSC IAS &#8211; 2018<\/div>\n<\/div>\n<div class=\"pyq-exam-psc-buttons\"><a href=\"\/pyq\/pyq-upsc-ias-2018.pdf\" target=\"_blank\" class=\"psc-pdf-button\" rel=\"noopener\">Download PDF<\/a><a href=\"\/pyq-upsc-ias-2018\" target=\"_blank\" class=\"psc-attempt-button\" rel=\"noopener\">Attempt Online<\/a><\/div>\n<\/div>\n<section id=\"pyq-correct-answer\">\nThe correct option is A because statement 1 provides a largely accurate description of Capital Adequacy Ratio (CAR), while statement 2 is incorrect.<br \/>\n<\/section>\n<section id=\"pyq-key-points\">\nCAR is a crucial prudential regulation for banks, ensuring they have sufficient capital to absorb potential losses from risks like loan defaults (credit risk). This minimum ratio is set by the banking regulator, not individual banks.<br \/>\n<\/section>\n<section id=\"pyq-additional-information\">\nStatement 1 correctly describes CAR as the ratio of a bank&#8217;s capital to its risk-weighted assets, maintained to absorb potential losses, including those from account holders failing to repay dues (Non-Performing Assets or NPAs). It ensures the bank remains solvent. Statement 2 is incorrect. The minimum Capital Adequacy Ratio that banks must maintain is mandated by the central bank (like the RBI in India) based on guidelines such as the Basel norms. Individual banks may choose to maintain a higher ratio for safety, but the minimum is externally determined by the regulator.<br \/>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>Consider the following statements : 1. Capital Adequacy Ratio (CAR) is the amount that banks have to maintain in the form of their own funds to offset any loss that banks incur if the account-holders fail to repay dues. 2. CAR is decided by each individual bank. Which of the statements given above is\/are correct &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"Consider the following statements :\n  1. Capital Adequacy Ratio (CAR)\" class=\"read-more button\" href=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/#more-91541\">Detailed Solution<span class=\"screen-reader-text\">Consider the following statements :<br \/>\n  1. Capital Adequacy Ratio (CAR)<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1092],"tags":[1114,1120,1190],"class_list":["post-91541","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1114","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Consider the following statements :  1. Capital Adequacy Ratio (CAR)<\/title>\n<meta name=\"description\" content=\"The correct option is A because statement 1 provides a largely accurate description of Capital Adequacy Ratio (CAR), while statement 2 is incorrect. CAR is a crucial prudential regulation for banks, ensuring they have sufficient capital to absorb potential losses from risks like loan defaults (credit risk). This minimum ratio is set by the banking regulator, not individual banks.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Consider the following statements :  1. Capital Adequacy Ratio (CAR)\" \/>\n<meta property=\"og:description\" content=\"The correct option is A because statement 1 provides a largely accurate description of Capital Adequacy Ratio (CAR), while statement 2 is incorrect. CAR is a crucial prudential regulation for banks, ensuring they have sufficient capital to absorb potential losses from risks like loan defaults (credit risk). This minimum ratio is set by the banking regulator, not individual banks.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T10:59:40+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Consider the following statements :  1. Capital Adequacy Ratio (CAR)","description":"The correct option is A because statement 1 provides a largely accurate description of Capital Adequacy Ratio (CAR), while statement 2 is incorrect. CAR is a crucial prudential regulation for banks, ensuring they have sufficient capital to absorb potential losses from risks like loan defaults (credit risk). This minimum ratio is set by the banking regulator, not individual banks.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/","og_locale":"en_US","og_type":"article","og_title":"Consider the following statements :  1. Capital Adequacy Ratio (CAR)","og_description":"The correct option is A because statement 1 provides a largely accurate description of Capital Adequacy Ratio (CAR), while statement 2 is incorrect. CAR is a crucial prudential regulation for banks, ensuring they have sufficient capital to absorb potential losses from risks like loan defaults (credit risk). This minimum ratio is set by the banking regulator, not individual banks.","og_url":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/","og_site_name":"MCQ and Quiz for Exams","article_published_time":"2025-06-01T10:59:40+00:00","author":"rawan239","twitter_card":"summary_large_image","twitter_misc":{"Written by":"rawan239","Est. reading time":"1 minute"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/","url":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/","name":"Consider the following statements : 1. 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This minimum ratio is set by the banking regulator, not individual banks.","breadcrumb":{"@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/exam.pscnotes.com\/mcq\/consider-the-following-statements-1-capital-adequacy-ratio-car\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/exam.pscnotes.com\/mcq\/"},{"@type":"ListItem","position":2,"name":"UPSC IAS","item":"https:\/\/exam.pscnotes.com\/mcq\/category\/upsc-ias\/"},{"@type":"ListItem","position":3,"name":"Consider the following statements : 1. 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