Capital Adequacy Ratio (CAR) Of Commercial Banks In Nepal

August 10, 2023 | Investopaper

What Is Capital Adequacy Ratio (CAR) ?

The capital adequacy plays a crucial role in maintaining the stability and sustainability of financial institutions. Capital adequacy ratio (CAR) is a metric that assesses a bank’s financial strength by comparing its capital against its risk-weighted assets. This ratio is vital as it serves as a safety net for banks, ensuring they have enough capital to absorb losses in the event of economic downturns or unforeseen financial shocks. In Nepal, the recent data on the capital adequacy ratios of various commercial banks provides valuable insights into the sector’s health and stability.

Capital adequacy is not merely a regulatory requirement but a fundamental principle that safeguards the interests of depositors, investors, and the entire financial system. A higher CAR suggests that a bank is well-prepared to handle financial shocks, reducing the risk of insolvency during economic downturns. It also enables banks to continue lending to businesses and individuals, contributing to economic growth even in challenging times.

Here, we have presented the capital adequacy ratio (CAR) of 20 commercial banks operating in Nepal. The data is of Ashad’s end 2080 BS [Mid-July, 2023].