Case Study 1 (Q1–Q5): Asset Liability Management (ALM) & Gap Analysis. Bank Omega’s Rate-Sensitive Assets (RSA) and Rate-Sensitive Liabilities (RSL) for the next 3 months are as follows (₹ Crores): RSA: ₹8,500 (includes floating rate loans ₹5,000 + short-term investments ₹3,500); RSL: ₹10,200 (includes floating rate deposits ₹6,000 + short-term borrowings ₹4,200); Net Interest Income (NII): ₹450 crore p.a.; Net Interest Margin (NIM): 3.2%; Total Assets: ₹14,062.50 crore. The bank’s ALCO is preparing for a 75 bps rate increase by RBI.
Q1. Calculate the Interest Rate Gap (RSA – RSL) for Bank Omega.
Q2. With a negative gap of ₹1,700 Crore and a 75 bps rate increase, what is the estimated impact on Net Interest Income (NII)?
Q3. What strategy should Bank Omega’s ALCO adopt to reduce its vulnerability to rising rates?
Q4. Bank Omega enters into an interest rate swap where it pays fixed 7.5% and receives MIBOR on a notional of ₹1,700 Crore. If MIBOR rises by 75 bps, what is the net benefit to the bank from this swap?
Q5. What is Basis Risk in the context of this interest rate swap hedge for Bank Omega?
Case Study 2 (Q6–Q10): Operational Risk – Standardised Approach & BIA. Bank Sigma’s Gross Income data (₹ Crores) for past 3 years: Corporate Finance — Y1: 800, Y2: 900, Y3: 1,000, Beta: 18%; Trading & Sales — Y1: 500, Y2: 600, Y3: 700, Beta: 18%; Retail Banking — Y1: 2,000, Y2: 2,200, Y3: 2,400, Beta: 12%; Commercial Banking — Y1: 1,200, Y2: 1,300, Y3: 1,400, Beta: 15%; Payment & Settlement — Y1: 300, Y2: 350, Y3: 400, Beta: 18%; Agency Services — Y1: 200, Y2: 250, Y3: 300, Beta: 15%; Retail Brokerage — Y1: 150, Y2: 180, Y3: 200, Beta: 12%; Asset Management — Y1: 400, Y2: 450, Y3: 500, Beta: 12%.
Q6. Under the Basic Indicator Approach (BIA), what is Bank Sigma’s operational risk capital charge? (Alpha = 15%; Use average gross income over 3 years of total bank.)
Q7. Under the Standardised Approach (TSA), what is the capital charge for Corporate Finance business line?
Q8. Under TSA, what is the capital charge for the Retail Banking business line?
Q9. Under the Standardised Approach, what is Bank Sigma’s TOTAL operational risk capital charge across all business lines?
Q10. Bank Sigma’s internal model shows that rogue trading losses could exceed ₹500 Crore in a single year. Under Basel III’s Advanced Measurement Approach (AMA), what type of loss data must the bank use to model such tail events?
Case Study 3 (Q11–Q15): Treasury Operations – Forex Forward Contracts & Cancellation. On 1st Feb 2025, M/s Zenith Imports booked a forward contract with City Bank to purchase USD 3,00,000 at ₹84.20/USD, delivery on 30th April 2025. On 15th April 2025, the importer requests cancellation. Market rates on 15th April 2025: Spot USD/INR: 83.90/83.96; 15-day forward premium: 0.08/0.10; Exchange margin: 0.15% on TT rates. The bank’s original buying rate was ₹84.20.
Q11. For cancellation of an import forward contract (where bank had agreed to sell USD), which rate does the bank now use to purchase USD from the market?
Q12. Calculate the TT Buying Rate for 15-day delivery (cancellation rate) with exchange margin of 0.15%.
Q13. If the cancellation (TT buying) rate is ₹83.872 and the original contract rate was ₹84.20, who gains and how much on USD 3,00,000?
Q14. If instead the importer wanted to extend the forward contract (roll-over) to 31st May 2025 (instead of cancelling), what does the bank do?
Q15. Under FEMA regulations, what is the maximum period for which a merchant forward contract can be booked for genuine trade transactions without RBI’s prior approval?
Case Study 4 (Q26–Q30): Credit Risk – Risk Weighted Assets & Standardised Approach. Bank Delta’s credit portfolio: AAA-rated Indian corporates: ₹200 Cr (RW: 20%); BBB-rated Indian corporates: ₹150 Cr (RW: 100%); Home loan LTV less than 75%: ₹300 Cr (RW: 35%); Commercial Real Estate: ₹100 Cr (RW: 100%); Sovereign exposure to GoI (₹ denominated): ₹500 Cr (RW: 0%); Unrated SME loan: ₹80 Cr (RW: 75%); Interbank exposure (more than 3 months, rated A): ₹50 Cr (RW: 50%); Cash & equivalent: ₹20 Cr (RW: 0%).
Q26. What is the Risk Weighted Asset (RWA) for the Home Loan portfolio (₹300 Crore, LTV less than 75%)?
Q27. What is the total RWA for Bank Delta’s entire credit portfolio listed above?
Q28. If Bank Delta has Tier 1 Capital of ₹45 Crore and Total Capital (T1+T2) of ₹55 Crore against total RWA of ₹480 Crore, is the bank meeting the minimum CET1 requirement of 5.5% under Basel III?
Q29. Under the Standardised Approach, what Credit Conversion Factor (CCF) is applicable to a bank guarantee (performance guarantee) for computing RWA?
Q50. Bank Delta has a ₹50 Crore trade finance exposure under a Letter of Credit (self-liquidating, short-term). What CCF applies under RBI Basel III guidelines?
Quiz Summary
Final Score: 0.0
