A bank's Statutory Liquidity Ratio (SLR) requirement is 18%. If deposits are ₹10,00,000 crore and current SLR maintenance is ₹1,95,000 crore, calculate the deficit/surplus:
Analyze the complex scenario: Bank Z has CAR of 16%, NPA ratio of 6.5%, and ROA of 0.8%. It wants to increase lending by ₹50,000 crore. What is the primary constraint?
ALow profitability
BCapital adequacy headroom
CHigh NPA ratio
DAll are equally constraining
Correct Answer:
B. Capital adequacy headroom
Explanation:
With 16% CAR (closer to Basel III minimum), and planned lending increase, the bank's capital adequacy becomes the binding constraint for expansion
Bank E's Return on Equity (ROE) decreased from 16.2% to 14.8% in Q3 2024 despite profit increase. What is the most likely reason?
AReduction in net profit
BIncrease in equity capital (capital infusion/retained earnings)
CDecrease in total assets
DDecline in interest income
Correct Answer:
B. Increase in equity capital (capital infusion/retained earnings)
Explanation:
ROE = Net Profit / Shareholders' Equity. A decrease in ROE despite profit increase suggests equity capital increased (through capital infusion or retained earnings), diluting the ROE metric.
Bank H's Net Interest Spread (NIS) narrowed from 2.4% to 2.1% in Q3 2024. What market condition likely caused this?
ARising interest rates
BCompressed yield curve
CIncreased loan demand
DDeclining deposit costs
Correct Answer:
B. Compressed yield curve
Explanation:
NIS = Rate earned on assets - Rate paid on deposits. Narrowing suggests the yield curve compressed, reducing the difference between lending and deposit rates, a typical scenario in monetary tightening.
Correct Answer:
C. Directions → Notifications → Circulars → Guidelines
Explanation:
RBI's regulatory instruments in descending order of mandate: Directions (mandatory), Notifications (legal), Circulars (operational guidance), Guidelines (advisory). Directions are most binding.
Bank J reported Capital Adequacy Ratio (CAR) of 15.2% with CET1 of 9.5%, Tier 1 of 11.8%, and Tier 2 of 3.4%. Is the bank compliant with Basel III norms?
ANon-compliant on CET1
BFully compliant with all requirements
CNon-compliant on Tier 1
DNon-compliant on overall CAR
Correct Answer:
B. Fully compliant with all requirements
Explanation:
Basel III minimums: CET1 6.5%, Tier 1 8.5%, Overall CAR 10.5%. Bank J has CET1 9.5%, Tier 1 11.8%, CAR 15.2% - exceeding all minimums and compliant with conservation buffers.
According to RBI's Monetary Policy 2024-25, the Statutory Liquidity Ratio (SLR) for Scheduled Commercial Banks was set at 18%. Bank Y maintains SLR compliance through Government securities worth ₹45,000 crores. What is Bank Y's approximate total liabilities?
A₹2,50,000 crores
B₹2,25,000 crores
C₹2,00,000 crores
D₹2,75,000 crores
Correct Answer:
A. ₹2,50,000 crores
Explanation:
SLR = 18% of total liabilities. If Government securities (SLR compliance) = ₹45,000 crores, then Total Liabilities = ₹45,000 / 0.18 = ₹2,50,000 crores. Tests understanding of RBI regulations and ratio calculations relevant to banking exams.
