Capital: Is it a punishment?

Do we want our PSBs to live hand-to-mouth at the poverty line of minimum capital? Research studies have suggested minimum core capital ratio ranging from 9% to 53% with a median of 13%

I have started with a question on capital: Why? Well, there has been much discussion in the media about the level of capital banks need to hold — should the capital adequacy ratio (ratio of capital to risk-weighted assets) — CAR — be 9 per cent as per Reserve Bank of India (RBI) norms? Or why not 8 per cent as per Basel norms? Should government-owned banks need to hold the same level of capital as other banks?
 

To discuss this, we first need to appreciate and distinguish between the roles of provisions and of capital. In a sentence, provisions