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