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Q.41Medium Data Interpretation
A scheduled commercial bank's Priority Sector Lending (PSL) target for FY2024-25 is 40% of adjusted net bank credit. The bank achieved 38% in Q3. What is the regulatory implication?
AThe bank has exceeded the target and will receive incentives
BThe bank is non-compliant and faces penalty
CThe bank must reach 40% by end of FY2024-25 or face penalties
DThe bank is fully compliant as Q3 performance is final
Correct Answer:
C. The bank must reach 40% by end of FY2024-25 or face penalties
Explanation:
PSL compliance is measured at the end of the financial year. Banks must maintain 40% PSL by March 31. Non-compliance attracts penalties equal to shortfall amount at repo rate + 50 bps.
Analyze the data: A bank's CASA ratio decreased from 42% in Q2 to 39% in Q3. What regulatory and operational concern does this raise?
AThe bank's liquidity position has improved
BThe bank is relying more on expensive term deposits, impacting NIM
CThe bank's Capital Adequacy Ratio will increase
DThe bank's advance portfolio has become riskier
Correct Answer:
B. The bank is relying more on expensive term deposits, impacting NIM
Explanation:
CASA (Current Account & Saving Account) ratio declining means lower proportion of low-cost deposits. The bank must fund advances with more expensive term deposits, which increases Cost of Funds and compresses NIM.
A bank's Gross NPA increased from ₹18,500 crore in FY2023 to ₹22,300 crore in FY2024, while total advances grew from ₹2,10,000 crore to ₹2,35,000 crore. What is the change in Gross NPA ratio?
AIncreased from 8.81% to 9.49%
BDecreased from 8.81% to 9.49%
CIncreased from 8.33% to 9.05%
DRemained constant at 8.81%
Correct Answer:
A. Increased from 8.81% to 9.49%
Explanation:
Gross NPA Ratio FY2023 = (18,500/2,10,000) × 100 = 8.81%. FY2024 = (22,300/2,35,000) × 100 = 9.49%. The ratio increased despite advances growth, indicating asset quality deterioration.
Under Basel III norms (as amended by RBI in 2024), what is the minimum Common Equity Tier-1 (CET1) capital requirement for Systemically Important Banks (SIBs)?
A5.50%
B6.00%
C6.50%
D7.00%
Correct Answer:
C. 6.50%
Explanation:
Basel III requires CET1 minimum of 4.5% plus Capital Conservation Buffer of 2.5%. For SIBs, an additional 0.5% surcharge applies, totaling 6.50% minimum CET1 requirement.
The RBI announced a reduction in the Standing Deposit Facility (SDF) rate by 25 basis points to 6.50%. What is the immediate market implication?
ABanks will have higher incentive to keep excess liquidity with RBI
BBanks will have lower incentive to deposit with RBI and may lend more
CThe money supply will automatically decrease
DAll banks must reduce their deposit rates immediately
Correct Answer:
B. Banks will have lower incentive to deposit with RBI and may lend more
Explanation:
SDF rate reduction makes RBI deposits less attractive, incentivizing banks to deploy liquidity in market lending rather than parking with RBI, potentially increasing money supply and lending.
A bank's Total Income grew by 18% YoY while Operating Expenses grew by 24% YoY. What does this indicate about Cost-to-Income Ratio?
ACost-to-Income Ratio has improved
BCost-to-Income Ratio has deteriorated
CCost-to-Income Ratio remains constant
DCannot be determined without absolute figures
Correct Answer:
B. Cost-to-Income Ratio has deteriorated
Explanation:
When operating expenses grow faster (24%) than total income (18%), the Cost-to-Income Ratio deteriorates, indicating reduced operational efficiency. A lower C/I ratio is preferable.
Examine the data: A bank's foreign exchange earnings increased from ₹2,400 crore to ₹2,850 crore while forex outflows increased from ₹1,900 crore to ₹2,100 crore. Calculate the change in net forex earnings.
AIncreased by ₹250 crore
BIncreased by ₹350 crore
CDecreased by ₹50 crore
DIncreased by ₹100 crore
Correct Answer:
A. Increased by ₹250 crore
Explanation:
Previous net forex = 2,400 - 1,900 = ₹500 crore. Current net forex = 2,850 - 2,100 = ₹750 crore. Change = 750 - 500 = ₹250 crore increase.
A bank's Liquidity Coverage Ratio (LCR) for the quarter is reported as 145%. What does this indicate about regulatory compliance?
AThe bank is non-compliant; LCR must be above 200%
BThe bank is compliant; minimum LCR requirement is 100%
CThe bank has excess liquidity that should be deployed
DThe bank faces immediate liquidity stress
Correct Answer:
B. The bank is compliant; minimum LCR requirement is 100%
Explanation:
RBI's minimum LCR requirement is 100%, to be maintained on a daily basis. At 145%, the bank is compliant with a comfortable liquidity buffer of 45% above the minimum.
