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 A reported a Net Interest Margin (NIM) of 2.8% in Q3 2024. If the bank's total interest income was ₹15,000 crores, what was the approximate net interest income?
A₹4,200 crores
B₹3,900 crores
C₹4,500 crores
D₹5,100 crores
Correct Answer:
A. ₹4,200 crores
Explanation:
NIM = Net Interest Income / Total Assets. Given NIM of 2.8% and interest income of ₹15,000 cr, net interest income approximates to ₹4,200 crores using the relationship between these metrics.
Which of the following is NOT a component of Basel III capital framework adopted by RBI?
ACommon Equity Tier 1 (CET1)
BTier 2 Capital
CTier 3 Capital
DPerpetual Subordinated Debt
Correct Answer:
C. Tier 3 Capital
Explanation:
Basel III framework comprises CET1, Tier 1, and Tier 2 capital. Tier 3 Capital was part of Basel II but has been eliminated in Basel III. RBI has adopted Basel III norms.
A bank's Asset Quality Ratio improved from 2.1% to 1.8% in FY 2024. What does this indicate?
ADeterioration in loan quality
BImprovement in loan quality
CNo significant change in portfolio
DIncrease in non-performing assets
Correct Answer:
B. Improvement in loan quality
Explanation:
Asset Quality Ratio (NPA ratio) measures gross NPAs as percentage of gross advances. A decrease from 2.1% to 1.8% indicates improvement in overall loan quality and reduced stressed assets.
Bank B's Cost-to-Income Ratio decreased from 48% to 44% between Q2 and Q3 2024. What is the implication for operational efficiency?
AOperational efficiency has deteriorated
BOperational efficiency has improved
CCost structure remains unchanged
DIncome has decreased significantly
Correct Answer:
B. Operational efficiency has improved
Explanation:
Cost-to-Income Ratio shows operating costs as percentage of operating income. A decrease from 48% to 44% indicates that the bank is spending less to generate each rupee of income, showing improved operational efficiency.
Examine the data: Bank X reported ₹5,000 crores in gross advances with ₹150 crores in gross NPAs. The bank maintained a provision coverage ratio of 65%. Calculate the net NPA amount.
A₹52.5 crores
B₹95 crores
C₹150 crores
D₹97.5 crores
Correct Answer:
A. ₹52.5 crores
Explanation:
Gross NPAs = ₹150 crores. Provisions made = 65% of ₹150 = ₹97.5 crores. Net NPA = ₹150 - ₹97.5 = ₹52.5 crores.
Under RBI's revised norms for 2024, what is the minimum Common Equity Tier 1 (CET1) ratio that banks must maintain?
A5.5%
B6.5%
C7.0%
D8.0%
Correct Answer:
B. 6.5%
Explanation:
As per Basel III implementation in India, RBI mandates a minimum CET1 ratio of 6.5% (including capital conservation buffer of 1.875%), increased from the earlier 5.5%.
Bank C's Loan-to-Deposit Ratio (LDR) increased from 78% to 83% in Q3 2024. What risk does this indicate?
AIncreased liquidity risk
BDecreased credit risk
CImproved deposit mobilization
DReduced loan portfolio
Correct Answer:
A. Increased liquidity risk
Explanation:
LDR of 83% means the bank is deploying 83% of deposits as loans. An increase towards the upper threshold (80% is regulatory comfort zone) indicates higher liquidity risk if deposits decline.
Which regulatory body is responsible for regulating Cooperative Banks in India?
ASEBI
BRBI and State Governments
CIRDA
DMinistry of Finance
Correct Answer:
B. RBI and State Governments
Explanation:
Cooperative Banks are regulated jointly by RBI (for scheduled cooperative banks) and respective State Governments under dual regulatory framework in India.
