The correct answer is Capital Adequacy Ratio. CAR stands for Capital Adequacy Ratio. Capital Adequacy Ratio:It is a measurement of a bank's available capital expressed as a percentage of a bank's risk-weighted credit exposures. It is also known as the capital-to-risk weighted assets ratio (CRAR). CAR is important to ensure that banks have enough ability to absorb a reasonable amount of losses before they become insolvent. Tier-1 capital can absorb a suitable amount of loss without forcing the bank to stop its trading. Tier-2 capital can sustain a loss if there's a liquidation of the bank. The bank which has a high capital adequacy ratio is considered to be safe.