BANK FINANCIAL MANAGEMENT 

Case studies / Numericals

CAIIB-BFM-CASE STUDIES - LAST MINUTE REVISION
1. Asset in doubtful-I category – Rs. 500000/-
Realization value of security – Rs. 400000/-
What will be the provision requirement?
a. Rs. 500000/-
b. Rs. 400000/-
c. Rs. 180000/-
d. Rs. 200000/-
Ans - d
Solution :
Asset in doubtful-I category – Rs. 500000/-
Secured portion = Rs. 400000/-
So, unsecured portion = Rs. 500000 - 400000 = 100000/- Provision for Secured portion in D-1 = 25 %
Provision for unSecured portion in D-1 = 100 % So, the total provision requirement
= (400000 x 25%) + (100000 x 100%)
= 100000 + 100000
= 200000

2. Given that Tier I capital is Rs. 500 crores and Tier II capital Rs. 800 crores and further given that RWA for credit risk Rs. 5000 crores, capital charge for market risk and operational risk Rs. 200 crores and Rs. 100 respectively, answer the following questions if the regulatory CAR is 8%. Based on the data given above, answer the following questions. What are the total risk weighted assets?
a. Rs. 7250 crores
b. Rs. 8750 crores
c. Rs. 9000 crores
d. Rs. 7800 crores
Ans – b
RWA of mkt risk
=200/.08=2500 RWA ops risk
=100/.08=1250 Total RWA = RWA credit risk+ RWA mkt risk+ RWA ops risk
= 5000+2500+1250
= 8750

3. Spot Rate - 35.6000/6500
Forward 1M=3500/3000 2M=5500/3000 3M=8500/8000
Transit Period - 20 days.
Exchange Margin - 0.15%.
Find Bill Buying Rate a. 33.1971
b. 34.1971
c. 35.1971
d. 36.1971
Ans - c
Solution :
Ans - Bill Buying Rate (Ready) : Bill Date + 20 days
Spot Rate = 35.6000 Less Forward Discount 1M (0.3500) Less Exchange Margin 0.15% (0.529)
i.e. 35.6000-.3500-.0529(0.15% of 35.2500) = 35.1971

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