Capital requirement is
categorized into 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, that
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 to meet a
proportion of the capital requirements for market risk.