A COMPARATIVE ASSESSMENT OF CAPITAL ADEQUACY IN SELECTED INDIAN PRIVATE SECTOR BANKS

Capital adequacy plays a pivotal role in maintaining the financial strength and credibility of a banking institution. It refers to the amount of capital a bank holds in relation to its risk-weighted assets and serves as a key indicator of its ability to absorb unexpected losses without compromising depositors’ interests. A well-capitalized bank is more resilient during financial distress and economic downturns, which in turn strengthens public confidence in the banking system. Capital adequacy is a critical indicator of a bank's financial health and its ability to absorb potential losses, ensuring long-term stability and sustainability in the financial system. This study undertakes a comparative assessment of capital adequacy among five leading private sector banks in India—HDFC Bank, ICICI Bank, IDFC First Bank, IndusInd Bank, and Kotak Mahindra Bank—over a five-year period from 2019-20 to 2023-24. Using data extracted from annual reports, the research analyses the Capital Adequacy Ratio (CAR) as the primary parameter to evaluate each bank's capacity to maintain a sufficient capital buffer against risk-weighted assets. The study is designed with two key objectives: first, to analyse the capital adequacy levels of the selected banks individually; and second, to compare them to identify differences in capital management strategies. The findings reveal significant differences in CAR among the banks, with some consistently maintaining higher ratios, indicating a more conservative risk posture, while others operate closer to the regulatory thresholds, suggesting a more aggressive approach toward asset growth. The study concludes that while private sector banks in India comply with regulatory requirements, there is a noteworthy variation in their capital adequacy frameworks. These findings have implications for policymakers, investors, and bank management in shaping sound capital planning and regulatory oversight.