RBI conducts on-site inspection and off-site supervision of Indian banks and based on its finding, RBI rates the banks on important parameters called _____. The letter A of these parameters stands for ____.
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CACS, advances
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CAMELS, assets
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CACS, asset quality
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CAMELS, asset quality
B
Correct answer
Explanation
The CAMELS rating system is a recognized international rating system that bank supervisory authorities use in order to rate financial institutions according to six factors represented by the acronym "CAMELS". Supervisory authorities assign each bank a score on a scale, and a rating of one is considered the best and the rating of five is considered the worst for each factor.
The components of a bank's condition that are assessed:
(C)apital adequacy
(A)ssets
(M)anagement Capability
(E)arnings
(L)iquidity (also called asset liability management)
(S)ensitivity (sensitivity to market risk, especially interest rate risk)