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Option 1 : 8 percent of the total risk weighted assets
The correct answer is 8 percent of the total risk weighted assets
BASEL Norms:
- The Basel Committee on Banking Supervision issues worldwide banking regulations known as Basel norms or Basel accords.
- The Basel rules are an attempt to harmonise banking laws around the world in order to enhance the global financial system.
- It is a set of Basel Committee on Banking Supervision agreements that focuses on the risks that banks and the financial system face.
- The Basel Committee has issued three sets of regulations which are known as Basel-I, II, and III.
BASEL - I :
- It was introduced in 1988.
- It focused almost entirely on credit risk.
- The possibility of a loss arising from a borrower's failure to repay a loan or meet contractual commitments is referred to as credit risk. It used to allude to the possibility of a lender not receiving the principal and interest owing to them.
- It defined capital and structure of risk weights for banks.
- Under Basel-I, banks operating internationally are required to maintain at least a minimum amount of capital (8%) based on their risk weighted assets.
- RWA means assets with different risk profiles.
- For example, an asset backed by collateral would carry lesser risks as compared to personal loans, which have no collateral.
- India adopted Basel-I guidelines in 1999.
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