Define different capital requirement

 Capital requirement is categorized in three tiers:

1. Tier-1 capital called ‘Core Capital’ comprises of highest quality of capital elements:

a) Paid up capital

b) Non-repayable share premium account c) Statutory reserve

d) General reserve

e) Retained earnings

f)  Minority interest in subsidiaries

g) Non-cumulative irredeemable preference shares h) Dividend equalization account

 

 2. Tier-2 capital called ‘Supplementary Capital’ represents other elements, which fall short of some of the characteristics of the core capital but contribute to the overall strength of a bank:

 

 a) General provision

b) Revaluation reserves

-    Fixed assets

-    Securities

-    Equity instrument

c) All other preference shares

d) Subordinated debt

 

 

3. Tier-3 capital called ‘Additional Supplementary Capital’, consists of short-term subordinated debt (original maturity 2 to 5 years) would be solely for the purpose of meeting a proportion of the capital requirements for market risk.