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.42Medium
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.43Easy
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.44Medium
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.45Easy
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.
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Q.46Hard
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.
Q.47Medium
Under the Basel III framework as per RBI guidelines (2024), what is the total capital requirement (Tier-1 + Tier-2) for a non-SIB scheduled commercial bank?
Answer: C
Basel III requires minimum CET1 of 4.5%, Tier-1 capital of 6%, and Total capital of 9% plus Capital Conservation Buffer of 2.5%, totaling 11.5% for non-SIB banks.
Q.48Medium
A bank's Dividend Payout Ratio increased from 35% to 48% despite a 12% decline in net profit. What is the strategic implication?
Answer: A
Higher payout ratio (48%) despite lower profit indicates the bank is distributing more of its earnings as dividends, retaining less capital for growth and strengthening reserves. This can impact future capital buffers.
Q.49Hard
Analyze the quarterly data: A bank's Advances grew 14% QoQ while Deposits grew 8% QoQ. If this trend continues, which regulatory metric is most at risk?
Answer: B
Advances growing faster (14%) than deposits (8%) will increase LTD ratio unsustainably and strain liquidity metrics. If continued, it could breach LCR and NSFR requirements, risking regulatory non-compliance.
Q.50Easy
A bank's Interest Earned increased by ₹850 crore while Interest Expended increased by ₹620 crore. What is the impact on Net Interest Income (NII)?
Answer: A
NII = Interest Earned - Interest Expended. If Interest Earned increases by ₹850 crore and Interest Expended increases by ₹620 crore, the net increase in NII = 850 - 620 = ₹230 crore.
Q.51Medium
A bank's provision coverage ratio (PCR) on Gross NPAs increased from 58% to 67% YoY. What does this signify?
Answer: B
PCR measures provisions made against Gross NPAs. An increase from 58% to 67% indicates the bank has provisioned more of its NPAs, improving its capacity to absorb potential losses and reducing future profit volatility.
Q.52Hard
Under RBI's resolution framework for financial stress, what is the key trigger for invoking prompt corrective action (PCA) for a bank?
Answer: B
RBI's PCA framework is triggered when a bank's capital ratio, asset quality (Net NPA > 6%), or profitability metrics breach specified thresholds. This is designed to protect financial stability.
Q.53Easy
A bank's efficiency ratio (operating expenses to operating income) is 42%. What does this indicate about the bank's operational health?
Answer: A
Efficiency ratio of 42% (operating expenses/operating income) indicates strong operational efficiency. Industry benchmark for healthy banks is typically 40-50%. Lower ratios indicate better cost management.
Q.54Easy
A bank's Net Interest Margin (NIM) improved from 2.8% to 3.2% year-on-year. If the bank's total assets are ₹5,00,000 crore, what is the approximate increase in NIM in absolute terms?
According to RBI guidelines 2024, what is the minimum Common Equity Tier 1 (CET1) ratio required for Scheduled Commercial Banks?
Answer: B
Under Basel III framework as implemented by RBI in 2024, the minimum CET1 ratio for SCBs is 6.5%, with an additional buffer requirement
Q.56Easy
A bank's Cost to Income Ratio decreased from 48% to 42% in FY2024. This indicates:
Answer: B
Lower Cost to Income Ratio indicates better operational efficiency as operating costs are lower relative to income generated
Q.57Easy
If a bank's Tier-II Capital is ₹45,000 crore and total Risk-Weighted Assets are ₹6,00,000 crore, calculate the Tier-II Capital Ratio:
Answer: C
Tier-II Capital Ratio = (Tier-II Capital / RWA) × 100 = (45,6000,00,000) × 100 = 7.5%
Q.58Medium
A bank's Deposit Growth Rate was 12% and Advances Growth Rate was 15% in FY2024. What does this scenario suggest?
Answer: B
When advances grow faster than deposits (15% > 12%), the Loan-to-Deposit ratio increases, indicating higher credit expansion relative to deposit mobilization
Q.59Medium
Analyze the quarterly data: Bank A's Non-Performing Assets decreased from ₹18,000 crore to ₹15,000 crore, while its Gross Advances remained ₹3,00,000 crore. Calculate the change in Gross NPA ratio:
Answer: C
Previous NPA ratio = (18,3000,00,000) × 100 = 6%. New NPA ratio = (15,3000,00,000) × 100 = 5%. The ratio decreased.
Q.60Medium
A bank's Return on Equity (ROE) improved from 12% to 14.5% while its Net Profit Margin decreased from 28% to 26%. This suggests:
Answer: B
Improved ROE despite lower NPM indicates higher financial leverage (more debt relative to equity), amplifying returns to equity holders
