SOLVED CAIIB COMBINED PAPER 48:
1. ABC co has following data as on 31-03-2015
Value in cr
Paid up capital (for 2 crore share with face value of Rs 10) - 20
Reserve - 60
Long term Loans - 80
PBIDT - 50
Paid interest - 12
Depreciation - 10
Tax - 08
Price earning ratio - 10
On this basis, Answer the following questions
a. Its net profit would be ......
a. Rs. 38 Cr
b. Rs. 40 Cr
c. Rs. 42 Cr
d. Rs. 20 Cr
Ans – d
PBIDT-I-D-T
= 50-12-10-8
= 20 cr
b. Book value of shares of the company as on 31-03-2015
a. Rs. 10 cr
b. Rs. 30 cr
c. Rs. 40 cr
d. Rs. 80 cr
Ans – c
Book value of shares = (paid up capital + reserve)/no of shares
= (20+60)/2
= 40
c. The earning per share would be ......
a. Rs. 40 cr
a. Rs. 30 cr
a. Rs. 20 cr
a. Rs. 10 cr
Ans – d
EPS=NPAT/paid up capital* face value
= 20/20*10
= 10
d. Market price of the share of the co......
a. Rs. 50 cr
a. Rs. 100 cr
a. Rs. 200 cr
a. Rs. 300 cr
Ans – b
Market price = PER * EPS
= 10*10
= 100
2. A claim of Rs. 49 lacs has been settled by ECGC in favour of a bank against default of Rs. 70 lacs. Subsequently the bank realizes Rs. 15 lacs with the collaterals available to the loan. What will be actual amount settled by ECGC after realization of security by the bank?
a. Rs. 49 lacs
b. Rs. 42.5 lacs
c. Rs. 38.5 lacs
d. Rs. 34 lacs
Ans - c
Explanation :
ECGC had settled Rs. 49 lacs on default of 70 Lacs (That is 70% of the default amount)
But Subsequent to that settlement, Rs. 15 lacs was realised through the security held. So, the claim amount from ECGC should be, 55 Lacs only from ECGC.
And the ECGC had settled only 70 % of the claim amount. So, the settlement amount will be,
70% of Rs. 55 lacs = 5500000 x 70/100 = 38.5 lacs
So, actual amount settled by ECGC = Rs. 38.5 lacs
3. Basel-II accord rests on three pillars. The second pillar of the accord is ......
a) Market Discipline
b) Risk Management
c) Supervisory review process
d) Operational risk management
Ans - c
4. For Substandard Secured Assets, the provision required is ...... of the outstanding amount.
a) 15%
b) 20%
c) 10% of the realizable value of security (RVS)
d) None of these
Ans - a
5. As per Basel II, Risk weighted assets for Operational risk are worked out as :
a) Capital for operational risk x 9
b) Capital for operational risk x 12.5
c) Capital for operation risk x 8.33
d) Capital for operational risk x 8
Ans - b
6. Under Basel III the risk weight for capital charge for credit risk on the basis of standardized approach, match for claims on foreign governments (based on rating of international rating agencies such as S & P, Fitch, Moody's Rating), in respect of which of the following:
(i) AAA to AA rating—0%,
(ii) BBB rating—20%
(iii) Below B rating—150%
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - b
7. Asset in doubtful category for 2 years – Rs. 500000/-
Realization value of security – Rs. 300000/-
What will be the provision requirement?
a. Rs. 500000/-
b. Rs. 320000/-
c. Rs. 200000/-
d. Rs. 175000/-
Ans - b
Explanation
Provision for secured portion of Doubtful Cat for 2 years = 40%
Provision for unsecured portion of Doubtful Cat for 2 years = 100%
Here,
Secured portion = Rs. 300000
Unsecured portion = Rs. 200000
Provision
= (300000 * 40/100) + 200000
= 120000 + 200000
= 320000
8. Data relating to balance sheet of a Bank on 14 Mar 2015 reveals that its
Capital at Rs. 1110 cr
Reserve 2150 cr
demand deposit 6500 cr
SB deposit 20500 cr
term deposits from banks 1300 cr
term deposit from public 30800 cr
borrowing from RBI nil
borrowing from other institutions 200 cr
refinance from NABARD 150 cr
bills payable 50 Cr
accrued 20 cr
sub ordinatted debt 200 cr
credit balance in suspense a/c 30 cr
Total amt of liabilities not to be included in computing DTLs in RS
a. 3250 cr
b. 3300 cr
c. 4600 cr
d. 4700 cr
Ans - d
(1100+2150+150+1300=4700)
In time liabilities, capital + reserve + refinance from NABARD + term deposit of banks are not to be included
9. Total amount of DTL on which CRR is to be maintained
a. 58100 cr
b. 63000 cr
c. 58300 cr
d. 67100 cr
Ans - c
=6500+20500+30800+200+50+20+200+30
=58300
other than those not included while calculating DTL
10. A bank has computed its Tier I capital - Rs. 1000 Crores.
Tier-II Capital - Rs 1200 Crores.
RWAs for Credit Risk - Rs 15,000 Crores.
Capital charge for market risk - Rs 600 Crores.
Capital charge for operational risk - Rs 400 Crores.
What would be the bank's total RWAs?
a. 18,889 Crores
b. 21,161 Crores
c. 26,111 Crores
d. 26,141 Crores
Ans - c
Solution :
RWAs for Credit Risk = Rs 15,000 Crores
RWAs for Market Risk = Rs 600/.09 = Rs 6,667 Crores
RWAs for Operational Risk = Rs 400/.09 = Rs 4,444 Crores
Total RWAs = 15000+6667+4444 = Rs 26,111 Crores
Tier I Capital = Rs 1,000 Crores
Tier II Capital = Rs 1,200 Crores
Total Capital = Rs 2,000 Crores
Maximum tier II capital that can be taken into account for the purpose of CRAR is 100% of tier I capital. Tier-I CRAR = (Eligible Tier I capital funds) - (Total RWAs) = 1000/26111 = 3.83%.
Total CRAR = (Eligible total capital funds) - (Total RWAs) = 2000/26111 = 7.66%. It may be noted that tier I capital of the bank is less than required level.
11. 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
12. 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.
a. 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
b. An advance of Rs. 400000/- has been declared sub standard on 31/05/2015. It is covered by securities with realizable value of Rs. 250000/-. What will be the total provision in the account as on 31/03/2015?
a. 150000
b. 75000
c. 55000
d. 50000
Ans - b
Explanation :
Sub standard assets will attract provision of 15 % for secured portion and 25 % for unsecured portion. Please refer “http://rbidocs.rbi.org.in/rdocs/notification/PDFs/62MCIRAC290613.pdf”
Page - 25, Para – 5.8. So,
= 15% of 250000 + 25% of of 150000
= 37500 + 37500
= 75000
Value in cr
Paid up capital (for 2 crore share with face value of Rs 10) - 20
Reserve - 60
Long term Loans - 80
PBIDT - 50
Paid interest - 12
Depreciation - 10
Tax - 08
Price earning ratio - 10
On this basis, Answer the following questions
a. Its net profit would be ......
a. Rs. 38 Cr
b. Rs. 40 Cr
c. Rs. 42 Cr
d. Rs. 20 Cr
Ans – d
PBIDT-I-D-T
= 50-12-10-8
= 20 cr
b. Book value of shares of the company as on 31-03-2015
a. Rs. 10 cr
b. Rs. 30 cr
c. Rs. 40 cr
d. Rs. 80 cr
Ans – c
Book value of shares = (paid up capital + reserve)/no of shares
= (20+60)/2
= 40
c. The earning per share would be ......
a. Rs. 40 cr
a. Rs. 30 cr
a. Rs. 20 cr
a. Rs. 10 cr
Ans – d
EPS=NPAT/paid up capital* face value
= 20/20*10
= 10
d. Market price of the share of the co......
a. Rs. 50 cr
a. Rs. 100 cr
a. Rs. 200 cr
a. Rs. 300 cr
Ans – b
Market price = PER * EPS
= 10*10
= 100
2. A claim of Rs. 49 lacs has been settled by ECGC in favour of a bank against default of Rs. 70 lacs. Subsequently the bank realizes Rs. 15 lacs with the collaterals available to the loan. What will be actual amount settled by ECGC after realization of security by the bank?
a. Rs. 49 lacs
b. Rs. 42.5 lacs
c. Rs. 38.5 lacs
d. Rs. 34 lacs
Ans - c
Explanation :
ECGC had settled Rs. 49 lacs on default of 70 Lacs (That is 70% of the default amount)
But Subsequent to that settlement, Rs. 15 lacs was realised through the security held. So, the claim amount from ECGC should be, 55 Lacs only from ECGC.
And the ECGC had settled only 70 % of the claim amount. So, the settlement amount will be,
70% of Rs. 55 lacs = 5500000 x 70/100 = 38.5 lacs
So, actual amount settled by ECGC = Rs. 38.5 lacs
3. Basel-II accord rests on three pillars. The second pillar of the accord is ......
a) Market Discipline
b) Risk Management
c) Supervisory review process
d) Operational risk management
Ans - c
4. For Substandard Secured Assets, the provision required is ...... of the outstanding amount.
a) 15%
b) 20%
c) 10% of the realizable value of security (RVS)
d) None of these
Ans - a
5. As per Basel II, Risk weighted assets for Operational risk are worked out as :
a) Capital for operational risk x 9
b) Capital for operational risk x 12.5
c) Capital for operation risk x 8.33
d) Capital for operational risk x 8
Ans - b
6. Under Basel III the risk weight for capital charge for credit risk on the basis of standardized approach, match for claims on foreign governments (based on rating of international rating agencies such as S & P, Fitch, Moody's Rating), in respect of which of the following:
(i) AAA to AA rating—0%,
(ii) BBB rating—20%
(iii) Below B rating—150%
a. Only (i) and (ii)
b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - b
7. Asset in doubtful category for 2 years – Rs. 500000/-
Realization value of security – Rs. 300000/-
What will be the provision requirement?
a. Rs. 500000/-
b. Rs. 320000/-
c. Rs. 200000/-
d. Rs. 175000/-
Ans - b
Explanation
Provision for secured portion of Doubtful Cat for 2 years = 40%
Provision for unsecured portion of Doubtful Cat for 2 years = 100%
Here,
Secured portion = Rs. 300000
Unsecured portion = Rs. 200000
Provision
= (300000 * 40/100) + 200000
= 120000 + 200000
= 320000
8. Data relating to balance sheet of a Bank on 14 Mar 2015 reveals that its
Capital at Rs. 1110 cr
Reserve 2150 cr
demand deposit 6500 cr
SB deposit 20500 cr
term deposits from banks 1300 cr
term deposit from public 30800 cr
borrowing from RBI nil
borrowing from other institutions 200 cr
refinance from NABARD 150 cr
bills payable 50 Cr
accrued 20 cr
sub ordinatted debt 200 cr
credit balance in suspense a/c 30 cr
Total amt of liabilities not to be included in computing DTLs in RS
a. 3250 cr
b. 3300 cr
c. 4600 cr
d. 4700 cr
Ans - d
(1100+2150+150+1300=4700)
In time liabilities, capital + reserve + refinance from NABARD + term deposit of banks are not to be included
9. Total amount of DTL on which CRR is to be maintained
a. 58100 cr
b. 63000 cr
c. 58300 cr
d. 67100 cr
Ans - c
=6500+20500+30800+200+50+20+200+30
=58300
other than those not included while calculating DTL
10. A bank has computed its Tier I capital - Rs. 1000 Crores.
Tier-II Capital - Rs 1200 Crores.
RWAs for Credit Risk - Rs 15,000 Crores.
Capital charge for market risk - Rs 600 Crores.
Capital charge for operational risk - Rs 400 Crores.
What would be the bank's total RWAs?
a. 18,889 Crores
b. 21,161 Crores
c. 26,111 Crores
d. 26,141 Crores
Ans - c
Solution :
RWAs for Credit Risk = Rs 15,000 Crores
RWAs for Market Risk = Rs 600/.09 = Rs 6,667 Crores
RWAs for Operational Risk = Rs 400/.09 = Rs 4,444 Crores
Total RWAs = 15000+6667+4444 = Rs 26,111 Crores
Tier I Capital = Rs 1,000 Crores
Tier II Capital = Rs 1,200 Crores
Total Capital = Rs 2,000 Crores
Maximum tier II capital that can be taken into account for the purpose of CRAR is 100% of tier I capital. Tier-I CRAR = (Eligible Tier I capital funds) - (Total RWAs) = 1000/26111 = 3.83%.
Total CRAR = (Eligible total capital funds) - (Total RWAs) = 2000/26111 = 7.66%. It may be noted that tier I capital of the bank is less than required level.
11. 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
12. 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.
a. 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
b. An advance of Rs. 400000/- has been declared sub standard on 31/05/2015. It is covered by securities with realizable value of Rs. 250000/-. What will be the total provision in the account as on 31/03/2015?
a. 150000
b. 75000
c. 55000
d. 50000
Ans - b
Explanation :
Sub standard assets will attract provision of 15 % for secured portion and 25 % for unsecured portion. Please refer “http://rbidocs.rbi.org.in/rdocs/notification/PDFs/62MCIRAC290613.pdf”
Page - 25, Para – 5.8. So,
= 15% of 250000 + 25% of of 150000
= 37500 + 37500
= 75000