Banking Awareness - Banking Acts, Reforms & Risk Management
The main purpose of capital adequacy under Basel norms is to:
The main purpose of capital adequacy under Basel norms is to:
medium Q15 of 15
Step-by-Step Solution
Step 1: Understand capital adequacy
Capital acts as a cushion for banks.Step 2: Identify its main function
Adequate capital helps banks absorb unexpected losses.Final Answer:
Enable banks to absorb financial losses → Option DQuick Check:
More capital = better loss-absorbing capacity ✅
Quick Trick: Capital = safety cushion.
Common Mistakes:
MISTAKES- Linking capital adequacy directly with profit maximisation.
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