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Comparison between capital adequacy ratio and lending rate of commercial banks of nepal

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Running head: COMPARISON BETWEEN CAPITAL ADEQUACY RATIO AND LENDING
RATE OF COMMERCIAL BANKS OF NEPAL 1
Comparison between Capital Adequacy Ratio and Lending Rate of Commercial Banks of Nepal
XX
Westcliff University
BUS 623 Financial Institute and Markets
XX
XX

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COMPARISON BETWEEN CAPITAL ADEQUACY RATIO AND LENDING RATE OF
COMMERCIAL BANKS OF NEPAL 2
Abstract
This paper has brief introduction of capital adequacy ratio and it relation to lending rates. The
different Basel requirement are imposed by NRB to commercial banks. The CAR and lending
rates of 10 commercial bank is collected and analyzed. The correlation between lending rates and
capital adequacy ratio is briefly answered in this assignment.

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Running head: COMPARISON BETWEEN CAPITAL ADEQUACY RATIO AND LENDING RATE OF COMMERCIAL BANKS OF NEPAL 1 Comparison between Capital Adequacy Ratio and Lending Rate of Commercial Banks of Nepal XX Westcliff University BUS 623 Financial Institute and Markets XX XX COMPARISON BETWEEN CAPITAL ADEQUACY RATIO AND LENDING RATE OF COMMERCIAL BANKS OF NEPAL 2 Abstract This paper has brief introduction of capital adequacy ratio and it relation to lending rates. The different Basel requirement are imposed by NRB to commercial banks. The CAR and lending rates of 10 commercial bank is collected and analyzed. The correlation between lending rates and capital adequacy ratio is briefly answered in this assignment. COMPARISON BETWEEN CAPITAL ADEQUACY RATIO AND LENDING RATE OF COMMERCIAL BANKS OF NEPAL 3 Capital Adequacy Ratio: Capital Adequacy Ratio (CAR) is a specialized ratio designed by the bank to calculate the adequacy of their capital while keeping in view their risk exposures (Mishkin & Eakins, 2006). It is used to protect the depositor’s money, provide stability and sound financial system by improving the risk absorbing capability of the banks. It provides banks with cushion to absorb losses before the liquidity crisis leads to insolvency. Higher CAR means that the banks need to lock in more capital in order to be able to take the measureable amount of risk. Tier 1 capital is also known as core capital improving the bank’s ability to cover certain amount of losses while no ...
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