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CAIIB-BFM-CASE STUDIES


A bank has compiled following data for computing its CRAR as on 30 Sep 2015

Tier I capital 2500
Tier ii capital 2000
RWA for credit risk other than retail assets
(include 2000 crores of commercial real estate - 35,500
Exposure on retail assets - 8,700
Total eligible financial collaterals available for retail assets - 1200
Capital charge for general market risk net position - 450
Capital charge for specific risk - 190
Capital charge for equity - 150
Vertical adjustment - 15
Horizontal adjustment - 10
Total capital charge for options - 70
Gross income for the previous year - 495
Gross income for the year before previous year - 450
Gross income for 2nd year before previous year - 390

Based on the data given above, answer the following questions.

The capital required for credit risk at minimum required rate as per RBI is ......

a. Rs. 4585 Crores
b. Rs. 4383 Crores
c. Rs. 3701 Crores
d. Rs. 3508 Crores

Ans - c

= 8700-1200=7500
@ 75% =5625
35500+5625=41125
9%= 3701 Crs
.............................................

Total Risk weighted assets for market risk is ......

a. Rs. 9833 Crores
b. Rs. 9553 Crores
c. Rs. 8952 Crores
d. Rs. 7156 Crores

Ans - a

Total Risk weighted assets for market risk

= 450+190+15+10+150+70
= 885/.09
= 9833 Crores
.............................................

Total weighted assets for operational risk is ......

a. Rs. 4944 Crores
b. Rs. 4323 Crores
c. Rs. 9553 Crores
d. Rs. 7156 Crores

Ans - a

1335/3
=885/.09
=4944
.............................................

The CRAR of the bank as on 30th Sept 2015 is ......

a. 7.35 %
b. 8.05 %
c. 9.22 %
d. 10.23 %

Ans - b

41125+9833+4944 = 55902
4500/55902
= 8.049
.............................................

The bank compares its tier I CRAR with minimum require tier I CRAR And finds

a. Its tier I CRAR is more and exceeds requirement by 675 Crs
b. Its tier I CRAR is more and exceeds requirement by 355 Crs
c. Its tier I CRAR falls short by Rs 854 Crs
d. None of these

Ans - c

(As per RBI, Tier I capital adequacy ratio should be atleast 6 %)
RWA is 55902
6 % of 55902 = 55902 x 6/100 = 3354.
Tier I capital is 2500.
So, 3354-2500=854
Tier I capital will be short fall by Rs. 854 Crores.

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