A bank grants a ₹50 lakh personal loan at 9.5% p.a. for 7 years. If the borrower makes a part-payment of ₹10 lakhs after 2 years, how much principal remains? (Assume no prepayment penalty)
Answer: B
After 2 years of EMI payments, the principal balance is reduced. A ₹10 lakh part-payment further reduces this, resulting in less than ₹40 lakh remaining.
Q.22Hard
A bank offers a Fixed Deposit at 6.2% p.a. compounded quarterly for 2 years on ₹1 lakh. What is the maturity amount? (Use: (1.0155)^8 ≈ 1.128)
A bank identifies a stressed asset with ₹10 crore outstanding. It makes a provision of 60%. Later, it recovers ₹2 crore. What is the net impact on profit & loss?
Answer: B
Provision made: ₹6 crore (charged as loss). Recovery: ₹2 crore (credited to P&L). Net impact: ₹2 crore gain (recovery > provision reversal applicable).
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Q.26Hard
A bank's Gross NPA declined from 4.2% to 3.1%, while Slippage ratio increased from 2.8% to 3.5%. What is the likely scenario?
Answer: A
Declining Gross NPA with increasing Slippage ratio suggests recovery of old NPAs but deteriorating new loan quality, indicating mixed asset quality trends.
Q.27Hard
Under the Basel III framework, what is the maximum leverage ratio (Tier 1 capital to total assets) for Indian banks as mandated by RBI in 2024?
Answer: B
RBI mandates a minimum leverage ratio of 3% (Tier 1 capital divided by total assets) for banks to prevent excessive leverage under Basel III.
Q.28Hard
Which RBI tool is used to control inflation by reducing money supply in the economy?
Answer: A
OMO sales of securities reduce liquidity and money supply. CRR reduction increases liquidity. QE and reverse repo rate cuts are expansionary measures.
Q.29Hard
A bank receives deposits of ₹10 lakh with a CRR of 4% and SLR of 18%. What is the maximum amount the bank can lend?
A bank's Provision Coverage Ratio (PCR) is 65%. Which interpretation is accurate?
Answer: B
PCR = (Total Provisions / Gross NPA) × 100. A 65% PCR means the bank has made provisions equivalent to 65% of its gross NPA.
Q.31Hard
Under Basel III, what is the total Capital Conservation Buffer (CCB) and Countercyclical Buffer (CCyB) combined requirement for Indian banks?
Answer: B
Basel III mandates CCB of 2.5% and CCyB up to 1% (currently 0%), making the combined requirement up to 3.5%. This is over and above the minimum CAR.
Q.32Hard
RBI's recent data shows that banks' Aggregate Deposits grew at 10.2% while Aggregate Advances grew at 14.8% in FY2024. What does this indicate?
Answer: D
Faster advance growth than deposit growth indicates banks must source funds from market borrowings, wholesale deposits, or other expensive channels, impacting profitability and liquidity management.
Q.33Hard
Which committee's recommendations led to the implementation of Basel III norms in Indian banking?
Answer: D
Basel III norms were developed by the Basel Committee on Banking Supervision and adopted globally to strengthen banking sector resilience post-2008 financial crisis.
Q.34Hard
Under Basel III, what is the minimum Common Equity Tier 1 (CET1) capital ratio required for banks?
Answer: A
Basel III mandates a minimum CET1 ratio of 4.5% of risk-weighted assets, along with additional capital buffers for systemically important banks.
Q.35Hard
What is the concept of 'Too Big to Fail' in banking regulation?
Answer: B
The 'Too Big to Fail' concept recognizes that systemically important banks require stricter regulation and capital requirements because their failure could trigger a financial crisis.
Q.36Hard
In a situation where a bank's Core Banking Solution (CBS) faces a system failure, which RBI regulation requires it to have a business continuity plan?
Answer: D
RBI's multiple guidelines including IT Risk Management and Operational Risk frameworks mandate banks to have robust business continuity and disaster recovery plans to ensure service continuity.
Q.37Hard
What is the Standing Liquidity Facility (SLF) introduced by RBI?
Answer: A
SLF is a standing facility introduced by RBI allowing scheduled banks to borrow funds against government securities, providing liquidity at a specified spread over the policy rate.
Q.38Hard
Under the RBI's regulatory framework, what is the maximum loan amount that comes under Priority Sector Lending (PSL)?
Answer: B
RBI guidelines specify Rs. 10 lakh limit for agriculture sector and Rs. 1 crore for micro-enterprises under Priority Sector Lending (as of 2024).
Q.39Hard
Which of the following best describes 'Securitization' in banking?
Answer: A
Securitization is the process of converting illiquid assets (like loans) into tradable securities that are backed by the underlying cash flows of those assets.
Q.40Hard
Under Basel III, what is the minimum Common Equity Tier 1 (CET1) capital ratio required?
Answer: A
Basel III requires a minimum CET1 capital ratio of 4.5%, with an additional capital conservation buffer of 2.5%, bringing the total to 7%.
