Question

The RBI laid down capital adequacy norms in _______.
 A. April 1989
B. April 1992
C. March 1996
D. March 2000

Answer 1

Hint: In India, capital adequacy norms are laid down and regulated by the Reserve Bank of India (RBI). The amount of capital required for maintaining a financial institution or bank is known as capital adequacy. In India, the Reserve Bank of India (RBI) fixes this amount. The maintenance of a fixed capital adequacy ratio (CAR) is necessary to illustrate the solvency of the bank. This maintenance was first recommended by the Narasimhan committee.

Complete answer:
The capital adequacy norms were laid down by the Reserve Bank of India in April 1992 upon the recommendations of the Narasimham Committee. As per the circular, Indian scheduled commercial banks need to maintain a capital adequacy ratio of 9%. However, Indian public sector banks need to maintain a ratio of 12%.

So, the correct answer is option “B” that is Reserve Bank of India (RBI) laid down capital adequacy norms in April 1992.

Additional information:
The Reserve Bank of India (RBI) is the central bank of India. It helps in regulating the banking system of India. It issues and supplies the Indian rupee. Also, it manages the main payment system of the country and thereby works in promoting its economic development. It oversees monetary policy, foreign exchange management, and currency issues. It works in a growing country economically. For scheduled commercial banks, it works as a banker, and for the government, it works like a bank.

Note: The ratio of the capital of a bank to its current account and assets weighted by risk is known as Capital Adequacy Ratio (CAR).