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15. CALCULATION OF CAPITAL FUND
​ ( FOR FUND BASED )

1. Renowned Bank is a leading bank in public sector and its balance sheet as on 31.03.2008 reveals the following inter-bank call money market lending and refinance & loans to other banks:

1 Call money lending Rs.1100 cr which comprises:
a)Rs.500 cr to a public sector bank having CRAR of 10%,
b)Rs.300 cr to a private bank having CRAR of 14%,
c)Rs.200 cr to a scheduled bank having CRAR of 8%,
d)Rs.50 cr to a non-scheduled bank with CRAR of 16%,
e)Rs.50cr to another non-scheduled bank with CRAR of
  5.5%.


2. Loans and refinance to other banks as under:
a)Rs.300 cr to a scheduled bank with CRAR of 5.5%
b)Rs.200 cr to a non-scheduled bank with CRAR of 15%
c)Rs.100 cr to a non-scheduled bank with CRAR of 8.5%.

What will be amount of capital fund required for this purpose and what will be the minimum or maximum amount of Tier I and Tier II Capital.
 

The RBI Guidelines on the issue are as under:
RBI Guidelines:
The claims on banks incorporated in India and foreign bank branches in India, will be risk weighted as under:
(i) All claims on scheduled banks, which comply with the minimum CRAR (9% presently), will be risk weighted at 20%.
(ii) All claims on non scheduled banks which meet the minimum CRAR (9% presently), will be assigned a risk weight of 100%.
(iii) Claims on other scheduled and non scheduled banks will be assigned a risk weight as applicable to the bank's CRAR position as under:

a)CRAR of 6 to < 9 : For scheduled bank - 50% and for non-scheduled bank 150%
b)CRAR of 3 to < 6 : For scheduled bank - 100% and for nonscheduled bank 250%
c)CRAR of 0 to < 3 : For scheduled bank - 150% and for nonscheduled bank 350%

Negative CRAR: For scheduled bank or non-scheduled bank 625%


Solution:
Risk weight for Call money lending to other banks:
a) 500 cr x 20% = 100 cr
b) 300 cr x 20 %= 60 cr
c) 200 cr x 50% = 100 cr
d) 50 cr x 100% = 50 cr
e) 50 cr x 250% = 125 cr


Total amount of risk weight for call money lending = 435
cr
Risk weight for loan and refinance to other banks:
​a) 300 cr x 100% = 300 cr
b) 200 cr x 100% = 200 cr
c) 100 cr x 150%= 150 cr


Total amount of risk weight for loans / refinance = 650 cr
Total amount risk weight assets = 435 + 650 cr
                                          = Rs.1085 cr.

Total capital fund requirement = 1085 x 9% = Rs.97.65 cr
Tier I capital should be minimum 50% = Rs.48.825 cr
Tier II capital can be maximum 50% = Rs.48.825 cr
​

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