Banks sanction loans to entities who back the same by collateral, but while assigning the loans banks face a risk of the loan turning bad. Due to this, banks typically hold or set aside a minimum amount of capital to face the eventuality of a default. Risk-weighted assets (RWA), in banking parlance, is a method used by lenders to calculate the capital adequacy ratio of a bank. As per Basel III standards, lenders must maintain a minimum of 8 percent capital adequacy ratio, while as per the norms issued by the Reserve Bank of India, banks' minimum capital adequacy ratio must be at least nine percent.