In banking terminology what is the full form of the abbreviation CAR and what does it represent?

Introduction / Context:
Banking exams and finance interviews frequently test abbreviations related to regulation and risk management. CAR is one of the most important of these. Knowing its full form and basic meaning shows that you understand how regulators ensure that banks remain safe and solvent. The question focuses on expanding CAR and recognising that it is a risk based capital measure rather than a general ratio or reserve.

Given Data / Assumptions:

• The abbreviation CAR is used specifically in the context of banking and prudential regulation.
• The options suggest several possible expansions of the letters C A and R.
• We assume standard Basel and Reserve Bank usage.
• The core concept is about capital held by banks relative to risk weighted assets.

Concept / Approach:
CAR stands for Capital Adequacy Ratio. It indicates the amount of bank capital expressed as a percentage of risk weighted assets. Regulators prescribe minimum CAR levels so that banks can absorb a reasonable amount of loss and protect depositors. For example under Basel norms banks must maintain a certain percentage of Tier 1 and Tier 2 capital relative to their risk weighted assets. The name Capital Adequacy Ratio accurately reflects its role in measuring whether capital is adequate to cover risks, while the other proposed expansions do not appear in standard banking vocabulary.

Step-by-Step Solution:
Step 1: Recall that CAR is discussed whenever regulators talk about minimum capital requirements and Basel norms.Step 2: Remember that it measures adequacy of capital relative to risk weighted assets rather than reserves or advances.Step 3: Compare each expansion. Only Capital Adequacy Ratio correctly names this regulatory ratio.Step 4: Current Applicable Ratio and Compulsory Advance Ratio do not correspond to any well known banking term.Step 5: Capital Available Reserve also does not match the risk based capital concept that CAR stands for.

Verification / Alternative check:
You can verify by thinking of the standard Basel equation which is capital divided by risk weighted assets multiplied by 100 percent. This is always described in textbooks and regulatory documents as the Capital Adequacy Ratio. The word adequacy signals that the ratio is about whether capital is sufficient. No regulator document uses Current Applicable Ratio or Capital Available Reserve as a key ratio name, which confirms that option B is the only valid expansion.

Why Other Options Are Wrong:
Option A, Current Applicable Ratio, is a generic phrase and not a recognised banking abbreviation. Option C, Capital Available Reserve, sounds like a description of reserves but CAR is not defined this way in regulation. Option D, Compulsory Advance Ratio, might tempt some candidates to think of directed lending but there is no such standard ratio with this name. Therefore these options are distractors and do not match the established meaning of CAR.

Common Pitfalls:
A common mistake is to confuse CAR with other similar abbreviations such as CRR Cash Reserve Ratio or SLR Statutory Liquidity Ratio. Another pitfall is to overthink the expansion and try to connect CAR to advances or reserves because those words are familiar. To avoid confusion memorise core regulatory acronyms together For example CRR is about cash reserves, SLR is about liquid assets, and CAR is about capital adequacy. This grouping helps you recall the correct expansion under exam pressure.

Final Answer:
In banking terminology CAR stands for Capital Adequacy Ratio which is the regulatory ratio of bank capital to risk weighted assets.