This section defines financial terms and ratio used in this publication.

Total Advances = Bills purchased & discounted (Short term) + Cash credits, overdrafts & loans
(Short term) + Term loans
Total Deposits = Demand Deposits + Savings Bank Deposit + Term Deposits
CASA Deposits = Demand Deposits + Savings Bank Deposits
CASA Ratio (%) = CASA Deposits/Total Deposits
Total Business = Total advances + Total deposits
Net-worth = Capital + Reserves & Surplus
Total Borrowings = Secured Borrowings (In India and Outside India) + Unsecured Borrowings
(In India and Outside India)
Total Assets = Cash in hand + Balances with RBI + Balances with banks inside/outside India +
Money at call + Investments + Advances + Fixed Assets + Other Assets
Average Total Assets = [Total Assets CY+ Total Assets PY]/2
Total Liabilities = Capital + Reserves & surplus + Deposits + Borrowings + Other liabilities &
provisions
Free Funds = CASA + Net-worth
Funds Deployed = [Total Assets {Fixed Assets + Other Assets}]
Average Funds Deployed = [Funds Deployed CY + Funds Deployed PY]/2
Funds in carry Business = Funds Deployed Non SLR Investments
Average Funds in carry Business =[Funds in carry Business CY + Funds in carry Business PY]/2
Borrowed Funds = Borrowings + Deposits + Bills Payable
Average Borrowed Funds = [Borrowed Funds CY + Borrowed Funds PY]/2
Incremental Free funds = Free funds CY Free funds PY
Net Interest Income = Interest Earned Interest Expended
Net Interest Margin (%) = Net Interest Income/Average Assets
Non Interest Income Margin (%) = Other Income/Average Assets
Interest Cost (%) = Interest expended/Average Borrowed funds
Yield in carry business (%) = Interest earned/Average funds in carry business
Spread (%) = Yield in carry business Interest cost
Core fee income = Other income [Net Profit/Loss sale of investments, land and other assets +
Net profit/Loss on revaluation of investments + 50% of the miscellaneous income]
Core fee income Ratio (%) = Core fee income/Average funds deployed
Operating Expense Ratio = Operating Expenses/Average funds deployed
Operating Profit Margin (%) = [Net interest income Operating expenses]/Interest earned
Cost to Income Ratio (%) = Operating expenses/[Net interest income + Other income]
Cost to Net Income Ratio (%) = Operating expenses/[Net interest income + Other income
{Net P&L from sale & revaluation of other assets, land and investments}]
Net Profit Margin (%) = Spreads + Core fee income Ratio Operating expense Ratio
Return on Assets (%) = Net Income or Profit/Average Total Assets
Return on Equity (%) = Net Income or Profit/Net-worth
Cash/Deposit Ratio (%) = [Cash in hand + Balances with RBI]/ Total deposits
Credit Deposit Ratio (%) = Total Advances/Total Deposits
Incremental Credit (Advances) = Total Advances CY Total Advances PY
Incremental Deposit = Total Deposits CY Total Deposits PY
Incremental Credit Deposit Ratio (%) = Incremental Advances/ Incremental Deposits
Investment Deposit Ratio (%) = Total Investments/Total Deposits
Incremental Investment = Total Investment CY Total Investments PY
Incremental Investment Deposit Ratio (%) = Incremental Investments/Incremental Deposits
SLR Investments = Investment in Government Securities + Investment in Approved Securities
SLR Investment Ratio (%) = SLR Investments/Total Investments
Statutory Liquidity Ratio (%) = SLR Investments/Total Deposits
Slippage Ratio (%) = Additions to Gross NPA/Opening Standard Assets
Provisioning cover (%) = NPA Provisions/ Gross NPA
Restructured Assets = Corporate Debt Restructured {Standard/Sub-standard/Doubtful} +
Other than Corporate Debt Restructured {Standard/Sub-standard/Doubtful}
Off-balance sheet exposure = Outstanding Forward Exchange Contracts + Guarantees given on
behalf of constituents + Acceptances & Endorsements + Other contingent liabilities
Sensitive Sector Advances = Capital Markets Sector Advances + Real Estate Sector Advances +
Commodity Sector Advances
Total Branches = Rural + Semi-urban + Urban + Metros
Total Branches (including ATMs) = Branches {Rural + Semi-urban + Urban + Metros} + ATMs
{On-site/ Off-site}
Business per branch = Total Business/Total Branches
Business per branch (including ATMs) = Total Business/Total Branches (including ATMs)
Business per employee = Total Business/ Total Employees
Profit per branch = Net Profit/ Total Branches
Profit per branch (including ATMs) = Net Profit/Total Branches (including ATMs)
Profit per employee = Net Profit/ Total Employees
Employee per branch = Total Employee/Total Branches
Employee per branch (including ATMs) = Total Employee/Total Branches (including ATMs)
Capital Adequacy ratio

The Committee on Banking Regulations and Supervisory Practices (Basel Committee) had
released the guidelines on capital measures and capital standards in July 1988 which were
been accepted by Central Banks in various countries including RBI. In India it has been
implemented by RBI w.e.f. 1.4.92

Objectives of CAR : The fundamental objective behind the norms is to strengthen the
soundness and stability of the banking system.

Capital Adequacy Ratio or CAR or CRAR : It is ratio of capital fund to risk weighted assets
expressed in percentage terms i.e.

Minimum requirements of capital fund in India:
* Existing Banks 09 %
* New Private Sector Banks 10 %
* Banks undertaking Insurance business 10 %
* Local Area Banks 15%

Tier I Capital should at no point of time be less than 50% of the total capital. This implies that
Tier II cannot be more than 50% of the total capital.

Capital fund

Capital Fund has two tiers - Tier I capital include
*paid-up capital
*statutory reserves
*other disclosed free reserves
*capital reserves representing surplus arising out of sale proceeds of assets.
Minus
*equity investments in subsidiaries,
*intangible assets, and
*losses in the current period and those brought forward from previous periods
to work out the Tier I capital.

Tier II capital consists of:
*Un-disclosed reserves and cumulative perpetual preference shares:
*Revaluation Reserves (at a discount of 55 percent while determining their value for
inclusion in Tier II capital)
*General Provisions and Loss Reserves upto a maximum of 1.25% of weighted risk assets:
*Investment fluctuation reserve not subject to 1.25% restriction
*Hybrid debt capital Instruments (say bonds):
*Subordinated debt (long term unsecured loans:

Risk weighted assets - Fund Based : Risk weighted assets mean fund based assets such
as cash, loans, investments and other assets. Degrees of credit risk expressed as
percentage weights have been assigned by RBI to each such assets.

Non-funded (Off-Balance sheet) Items : The credit risk exposure attached to off-balance
sheet items has to be first calculated by multiplying the face amount of each of the off-
balance sheet items by the credit conversion factor. This will then have to be again multiplied
by the relevant weightage.

Reporting requirements :
Banks are also required to disclose in their balance sheet the quantum of Tier I and Tier II
capital fund, under disclosure norms.
An annual return has to be submitted by each bank indicating capital funds, conversion of
off-balance sheet/non-funded exposures, calculation of risk -weighted assets, and
calculations of capital to risk assets ratio,