## SOLVED CAIIB COMBINED PAPER 46:

**1. Balance sheet of a bank provides the following information:**

Fixed Assets - 1000cr

Investment in central Govt Securities - Rs 10000cr

In standard loan accounts

Housing Loans - RS 6000cr (Secured, below Rs 10 lac)

the Retail loan - Rs 4000cr

Other loans - Rs 8000 cr

sub-standard secured loans - Rs 1000 cr

sub-standard unsecured loans - Rs 500 cr

Doubtful loans (D-1, secured) - Rs 800 cr

Doubtful loans (D-1, unsecured) - Rs 600 cr

Doubtful loans (D-2, secured) - Rs 500 cr

Doubtful loans (D-2, unsecured) - Rs 1000 cr

Doubtful loans (D-3, secured) - Rs 1000 cr

Doubtful loans (D-3, unsecured) - Rs 600 cr

Loss Assets - 50 cr and

other assets - Rs 500 cr.

Answer the following questions, based on this information, by using standard Approach for credit risk.

1. What is the amount of RWAs for investment in govt securities?

a. Rs 5000cr

b. Rs 3500cr

c. Rs 2500cr

d. Nil

2. What is the amount of RWAs for sub-standard secured accounts?

a. Rs 500cr

b. Rs 7500cr

c. Rs 1000cr

d. Rs 1500cr

3. What is the amount of RWAs for sub-standard unsecured accounts?

a. Rs 500cr

b. Rs 7500cr

c. Rs 1000cr

d. Rs 1500cr

4. What is the amount of RWAs for doubtful (D-1, Secured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

5. What is the amount of RWAs for doubtful (D-1, unSecured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

6. What is the amount of RWAs for doubtful (D-2, Secured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

7. What is the amount of RWAs for doubtful (D-2, unSecured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

8. What is the amount of RWAs for doubtful (D-3, Secured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

9. What is the amount of RWAs for doubtful (D-3, Secured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

10. What is the amount of RWAs for retail loans?

a. 3000cr

b. 4000cr

c. 5000cr

d. 6000cr

11. What is the amount of RWAs for housing loans?

a. 3000cr

b. 4000cr

c. 5000cr

d. 6000cr

Solution :

1. d

RW against Govt Securities = 0 %

So, RWA

= 10000 x 0%

= 0 Cr

2. d

If the provision is less than 20 %, then RW is 150%

If the provision is 20-50 %, then RW is 100%

If the provision is more than 50 %, then RW is 50%

Provision in Sub-Standard Secured - 15 %, and so, RW = 150 %

So, RWA

= 1000 x 150 %

= 1500 Cr

3. a

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in Sub-Standard Un-Secured - 25 %, and so, RW = 100 %

So, RWA

= 500 x 100 %

= 500 Cr

4. c

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-1, Secured) - 25 %, and so, RW = 100 %

So, RWA

= 800 x 100 %

= 800 Cr

5. a

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-1, unsecured) - 100 %, and so, RW = 50 %

So, RWA

= 600 x 50 %

= 300 Cr

6. b

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-2, Secured) - 40 %, and so, RW = 100 %

So, RWA

= 500 x 100 %

= 500 Cr

7. b

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-2, unsecured) - 100 %, and so, RW = 50 %

So, RWA

= 1000 x 50 %

= 500 Cr

8. b

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-3, Secured) - 100 %, and so, RW = 50 %

So, RWA

= 1000 x 50 %

= 500 Cr

9. a

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-3, unsecured) - 100 %, and so, RW = 50 %

So, RWA

= 600 x 50 %

= 300 Cr

10. a

RW on retail loans = 75 %

So, RWA

= 4000 x 75%

= 3000 Cr

11. a

RW on housing loans = 50 %

So, RWA

= 6000 x 50%

= 3000 Cr

2. Basic Indicator Approach (BIA) is one of the methods for computation of capital charge for:

a. Interest rate risk

b. Market risk

c. Operational risk

d. Credit risk

Ans - c

3. For standard assets, the provision required is ...... of the outstanding amount.

a. 0.10%

b. 0.20%

c. 0.40%

d. 0.25%

Ans - c

4. As per Basel III, general provisions and loss reserves are included in Tier-2 capital maximum to the extent of:

a. 1.25% of total risk weighted assets under standardized approach and 0.6% of total risk weighted assets under IRB approach

b. 0.6% of total risk weighted assets under standardized approach and 0.6% of total risk weighted assets under IRB approach

c. 0.6% of total risk weighted assets under standardized approach and 1.25% of total risk weighted assets under IRB approach

d. 1.25% of total risk weighted assets under standardized approach and 1.25% of total risk weighted assets under IRB approach

Ans - a

5. As per Basel III, the value of revaluation reserve is to be taken at ...... % discount to include in Tier 2 capital

a. 60%

b. 55%

c. 50%

d. 45%

Ans - b

6. A bank has compiled following data for computing its CRAR as on 30 Sep 2014

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

7. 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

8. 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

9.The CRAR of the bank as on 30th Sept 2014 is ......

a. 7.35 %

b. 8.05 %

c. 9.22 %

d. 10.23 %

Ans - b

41125+9833+4944 = 55902

4500/55902

= 8.049

10. 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.

Fixed Assets - 1000cr

Investment in central Govt Securities - Rs 10000cr

In standard loan accounts

Housing Loans - RS 6000cr (Secured, below Rs 10 lac)

the Retail loan - Rs 4000cr

Other loans - Rs 8000 cr

sub-standard secured loans - Rs 1000 cr

sub-standard unsecured loans - Rs 500 cr

Doubtful loans (D-1, secured) - Rs 800 cr

Doubtful loans (D-1, unsecured) - Rs 600 cr

Doubtful loans (D-2, secured) - Rs 500 cr

Doubtful loans (D-2, unsecured) - Rs 1000 cr

Doubtful loans (D-3, secured) - Rs 1000 cr

Doubtful loans (D-3, unsecured) - Rs 600 cr

Loss Assets - 50 cr and

other assets - Rs 500 cr.

Answer the following questions, based on this information, by using standard Approach for credit risk.

1. What is the amount of RWAs for investment in govt securities?

a. Rs 5000cr

b. Rs 3500cr

c. Rs 2500cr

d. Nil

2. What is the amount of RWAs for sub-standard secured accounts?

a. Rs 500cr

b. Rs 7500cr

c. Rs 1000cr

d. Rs 1500cr

3. What is the amount of RWAs for sub-standard unsecured accounts?

a. Rs 500cr

b. Rs 7500cr

c. Rs 1000cr

d. Rs 1500cr

4. What is the amount of RWAs for doubtful (D-1, Secured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

5. What is the amount of RWAs for doubtful (D-1, unSecured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

6. What is the amount of RWAs for doubtful (D-2, Secured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

7. What is the amount of RWAs for doubtful (D-2, unSecured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

8. What is the amount of RWAs for doubtful (D-3, Secured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

9. What is the amount of RWAs for doubtful (D-3, Secured) accounts?

a. Rs 300cr

b. Rs 500cr

c. Rs 800cr

d. Rs 900cr

10. What is the amount of RWAs for retail loans?

a. 3000cr

b. 4000cr

c. 5000cr

d. 6000cr

11. What is the amount of RWAs for housing loans?

a. 3000cr

b. 4000cr

c. 5000cr

d. 6000cr

Solution :

1. d

RW against Govt Securities = 0 %

So, RWA

= 10000 x 0%

= 0 Cr

2. d

If the provision is less than 20 %, then RW is 150%

If the provision is 20-50 %, then RW is 100%

If the provision is more than 50 %, then RW is 50%

Provision in Sub-Standard Secured - 15 %, and so, RW = 150 %

So, RWA

= 1000 x 150 %

= 1500 Cr

3. a

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in Sub-Standard Un-Secured - 25 %, and so, RW = 100 %

So, RWA

= 500 x 100 %

= 500 Cr

4. c

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-1, Secured) - 25 %, and so, RW = 100 %

So, RWA

= 800 x 100 %

= 800 Cr

5. a

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-1, unsecured) - 100 %, and so, RW = 50 %

So, RWA

= 600 x 50 %

= 300 Cr

6. b

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-2, Secured) - 40 %, and so, RW = 100 %

So, RWA

= 500 x 100 %

= 500 Cr

7. b

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-2, unsecured) - 100 %, and so, RW = 50 %

So, RWA

= 1000 x 50 %

= 500 Cr

8. b

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-3, Secured) - 100 %, and so, RW = 50 %

So, RWA

= 1000 x 50 %

= 500 Cr

9. a

If the provision is less than 20 %, then RW is 150%

If the provision is 20-49 %, then RW is 100%

If the provision is 50% or more, then RW is 50%

Provision in doubtful (D-3, unsecured) - 100 %, and so, RW = 50 %

So, RWA

= 600 x 50 %

= 300 Cr

10. a

RW on retail loans = 75 %

So, RWA

= 4000 x 75%

= 3000 Cr

11. a

RW on housing loans = 50 %

So, RWA

= 6000 x 50%

= 3000 Cr

2. Basic Indicator Approach (BIA) is one of the methods for computation of capital charge for:

a. Interest rate risk

b. Market risk

c. Operational risk

d. Credit risk

Ans - c

3. For standard assets, the provision required is ...... of the outstanding amount.

a. 0.10%

b. 0.20%

c. 0.40%

d. 0.25%

Ans - c

4. As per Basel III, general provisions and loss reserves are included in Tier-2 capital maximum to the extent of:

a. 1.25% of total risk weighted assets under standardized approach and 0.6% of total risk weighted assets under IRB approach

b. 0.6% of total risk weighted assets under standardized approach and 0.6% of total risk weighted assets under IRB approach

c. 0.6% of total risk weighted assets under standardized approach and 1.25% of total risk weighted assets under IRB approach

d. 1.25% of total risk weighted assets under standardized approach and 1.25% of total risk weighted assets under IRB approach

Ans - a

5. As per Basel III, the value of revaluation reserve is to be taken at ...... % discount to include in Tier 2 capital

a. 60%

b. 55%

c. 50%

d. 45%

Ans - b

6. A bank has compiled following data for computing its CRAR as on 30 Sep 2014

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

7. 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

8. 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

9.The CRAR of the bank as on 30th Sept 2014 is ......

a. 7.35 %

b. 8.05 %

c. 9.22 %

d. 10.23 %

Ans - b

41125+9833+4944 = 55902

4500/55902

= 8.049

10. 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.