If the RBI reduces the Repo Rate by 50 basis points, what is the likely impact on a bank's Net Interest Margin (NIM) in the short term?
Answer: B
When repo rate decreases, banks cut lending rates faster than deposit rates, compressing NIM (interest spread)
Q.422Hard
Analyze the stress test data: Under the baseline scenario, a bank's CRAR is 12.5%. Under the adverse scenario (with 200 bps slippage in NPA), the CRAR drops to 10.8%. What is the impact on capital adequacy?
Answer: A
Decline = 12.5% - 10.8% = 1.7% = 170 bps. 10.8% is still above Basel III minimum CRAR of 10.5%
Q.423Hard
A bank's Effective Interest Rate (EIR) on advances is 9.2% and on deposits is 4.1%. If advances constitute 65% of total earning assets and deposits form 75% of total liabilities, calculate the approximate Net Interest Spread (NIS).
Answer: C
NIS = (Yield on Advances × Advances % / Total Assets) - (Cost of Deposits × Deposits % / Total Liabilities). Simplified: 9.2% - 4.1% = 5.1% as basic spread
Q.424Hard
Study the multi-year data: CAR in FY2022: 13.2%, FY2023: 13.8%, FY2024: 14.5%. If RWA increased by 18% from FY2023 to FY2024, what is the percentage change in capital?
Answer: C
CAR = Capital/RWA. 14.5% = Capital / (RWA×1.18). If FY2023 CAR was 13.8%, capital must have grown at: 14.135.8 × 1.18 = 1.248 = 24.8% growth
Q.425Medium
A scheduled commercial bank reports: Tier-1 Capital: ₹50,000 crore, Tier-2 Capital: ₹20,000 crore, RWA: ₹500,000 crore. Calculate the Total Capital Ratio and determine compliance status.
Answer: B
Total Capital = ₹50,000 + ₹20,000 = ₹70,000 crore. CRAR = 70,500000,000 = 14%. Basel III minimum is 10.5%, so 14% is compliant
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Q.426Hard
A bank's treasury portfolio shows: Government Securities ₹1,50,000 crore (YTM: 6.8%), Corporate Bonds ₹75,000 crore (YTM: 7.8%), Money Market Instruments ₹25,000 crore (YTM: 6.2%). Calculate the portfolio's weighted average yield.
Examine the comparative data: Bank A has NPA ratio of 1.8% with provision coverage of 72%, Bank B has NPA ratio of 2.2% with provision coverage of 68%. Which bank has better asset quality indicators in terms of net NPA?
Answer: B
Net NPA = GNPA × (1 - Provision Coverage). Bank A: 1.8% × (1 - 0.72) = 1.8% × 0.28 = 0.504% ≈ 0.50%. Bank B: 2.2% × 0.32 = 0.704% ≈ 0.70%. Bank A is better
Q.428Easy
A bank's Loan-to-Deposit (LTD) ratio increased from 78% in FY2023 to 82% in FY2024. What does this indicate?
Answer: A
LTD ratio measures advances as a percentage of deposits. An increase from 78% to 82% means the bank is lending more aggressively relative to deposits, which could indicate higher credit expansion or lower deposit growth.
Q.429Medium
If a bank's Cost of Funds increased by 75 basis points while the Yield on Assets increased by 50 basis points, what is the likely impact on Net Interest Margin (NIM)?
Answer: B
NIM = Yield on Assets - Cost of Funds. If Cost of Funds increases by 75 bps and Yield increases by only 50 bps, NIM decreases by 25 bps (50 - 75 = -25).
Q.430Medium
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?
Answer: C
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.
Q.431Easy
A bank reports Operating Profit of ₹8,500 crore and Provisions & Contingencies of ₹2,100 crore. Calculate the Pre-tax Profit.
Answer: A
Pre-tax Profit = Operating Profit - Provisions & Contingencies = 8,500 - 2,100 = ₹6,400 crore. Provisions are deducted before arriving at pre-tax profit.
Q.432Medium
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?
Answer: B
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.
Q.433Medium
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?
Answer: A
Gross NPA Ratio FY2023 = (18,2500,10,000) × 100 = 8.81%. FY2024 = (22,2300,35,000) × 100 = 9.49%. The ratio increased despite advances growth, indicating asset quality deterioration.
Q.434Medium
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)?
Answer: C
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.
Q.435Hard
A bank's Return on Assets (ROA) is 1.2% with a Net Profit Margin of 24%. What is the implied Asset Turnover Ratio?
Answer: A
ROA = Net Profit / Total Assets. Net Profit Margin = Net Profit / Revenue. Asset Turnover = Revenue / Assets. ROA = NPM × Asset Turnover. 1.2% = 24% × Asset Turnover. Asset Turnover = 0.05 times.
Q.436Medium
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?
Answer: B
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.
Q.437Easy
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?
Answer: B
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.
Q.438Medium
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.
Answer: A
Previous net forex = 2,400 - 1,900 = ₹500 crore. Current net forex = 2,850 - 2,100 = ₹750 crore. Change = 750 - 500 = ₹250 crore increase.
Q.439Easy
A bank's Liquidity Coverage Ratio (LCR) for the quarter is reported as 145%. What does this indicate about regulatory compliance?
Answer: B
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.
Q.440Hard
A bank reports Floating Rate Advances of ₹1,50,000 crore and Fixed Rate Advances of ₹90,000 crore. If rates rise by 200 bps, what is the repricing benefit compared to a bank with 60% floating rate portfolio?
Answer: A
First bank has 62.5% floating rate (150,240000,000), second bank has 60%. First bank will capture more repricing benefit when rates rise as more of its portfolio reprices upward, enhancing net interest income.
