Banking

Question 1

Companies ability to meet its financial obligations is measured through-
It also measures how much capital comes in— form.

Answer 1

Leverage Ratio

Question 2

— is used to measure a company’s mix of operating expenses to get an idea of how changes in output will affect operating income.

Answer 2

Leverage ratio-
This means they restrict how much money a bank can lend relative to how much capital the bank devotes to its own assets. The level of capital is important because banks can “write down” the capital portion of their assets if total asset values drop. Assets financed by debt cannot be written down because the bank’s bondholders and depositors are owed those fund.

Question 3

RBI relaxed — so that banks can lend more.

Answer 3

Leverage Ratio.

The Reserve Bank of India (RBI) issued a prudential framework for resolution of stressed assets,

Question 4

Prudential Framework for resolution of stressed assets- RBI made it – for lenders to take defaulters to use —.
It gives lenders – days to review a borrower account before labeling it as a — in case of default.
This framework replaces the earlier circular which mandated lenders to start resolution even if there was one day default. This circular was quashed by the Supreme Court.

Answer 4

Voluntary, IBC.

30 days, NPA.

Question 5

Asset reconstruction companies-ARCs- are now – from buying fin. assets from their sponsors and lenders.
ARCs are registered under- —-.

Answer 5

Barred.
ARC- special type of financial inst. that buys the debtors of banks at a mutually agreed value in an attempt to recover them.
Sarfaesi act, 2002

Question 6

Reforms for UCBs- RBI revised – for deterioration of financial position.
3 Parameters-

Answer 6

Supervisory Action Framework on UCBs.
3 Parameters- 1) Net NPAs exceed 6% of net advances. 2) Losses for 2 consecutive fin yrs or have accumulated losses on their balance sheets. 3) CAR falls below 9%.

Question 7

Reforms for UCBs- RBI directed large UCBs with assets of — and above to report all exposures of – and above to —.

Answer 7

Rs 500 crores and above.

Rs 5 crore and above.

Question 8

CRILC- Central Repository of Info on large credits- set up by – in – for early recognition of fin. distress. It is a part of framework for — in the econ.

Answer 8

By RBI, 2014-15.
Framework for revitalizing distressed assets.
ALL Scheduled Commercial banks, ALL
India financial institutions and certain
non-banking financial companies
report to CRILC having aggregate
FUND BASED and NON FUND BASED
exposure of Rs 5 Crore and above.

Question 9

Bank for Intn Settlements- Intn fin inst. owned by — and serves as —- for —.
HQ-
Hosts and supports intn inst engaged in std setting and fin stability.
for eg- —

Answer 9

Central Banks, serves a bank for central banks.
Basel, Swit
Basel committee on banking supervision-BCBS

Question 10

BCBS i.e.— formed in— to devlp —.
— countries and —.
It’s series of policy recmd aka — .

Answer 10

Basel Committee on Banking Supervision- 1974- stds for banking regulation.
27- EU.
Basel Accords.
The other important Basel
Standards are Minimum Common
Equity Capital Ratio, Counter-cyclical
Capital Buffer Framework,
Minimum tier 1 Capital, Minimum
total capital, D-sib requirements
etc.

Question 11

RBI follows — which is being implemented in India since – in — which will be fully implemented by —.

Answer 11

Basel III- April 2013- phased manner- March 2019.

Question 12

Tier I- —+—-+—-+—-

At least — of CAR must come from Tier I cap which is aka —

Answer 12

Money kept as= SLR+ physical cash form+ share capital+ secured loans.
6%- Core capital

Question 13

Tier II cap aka —

Includes- —+—+—+—-

Answer 13

Supplementary capital.
After tax income+ retail earnings of bank+ Capital in the form of bonds/ hybrid instruments and unsecured loans( getting serviced)

Question 14

Tier III- —+—-+—-

Answer 14

NPAs+ subordinated loans(not getting serviced)+ undisclosed reserves from balance sheet.

Question 15

ICA i.e. — aimed at resolution of accounts with a size of — under a control group of —.
part of — and based on recmd by —- that looked into —.

Answer 15

Inter-Creditor Agreement.
Rs 50 Crore and above- under control group of LENDERS.
Sashakt plan- Sunil Mehta Committee- Stressed assets.

Question 16

BBB i.e. — set in — as an — body, based on recmd of the— - appointed —- to improve governance of—.
Replaced—-.
Also madated to — on top level bank appts and assist banks with cap-raising plans and ways to deal with bad loans.

Answer 16

Banks board bureau- 2016- autonomous body- PJ Nayak committee- PSBs.
Appointments board of govt.
Advise the govt.

Question 17

Reasons for the lag in Mpt- 1) Overdependence on Banks-

2) Locking of bank funds due to —. It also leads to low returns on ___ to the public and low returns for— as well.
3) Increasing—- - impedes banks ability to offer—- .
4) Suboptimal performance of MCLR system- as suggested by—-.

Answer 17

Banks still monopolise the fin lending in india, therefore reducing the banks dependency on the repo rate.
Double fin. repression- savings- banks.
NPAs- lower interest rates.
Janak raj Committee.

Question 18

Double financial repression refers to repression on – and – side both.
it is mainly caused due — on the asset side and — on the liability side.
This term was first used in — by —

Answer 18

Asset and liability.
SLR requirements- PSL requirements.
ESI 2015, Central Economic advisor Subramanian.

Question 19

Financial sector regulatory appt search committee- As per – RBI should have —+—
2 from — and 1 from — and 1 form — who will also head —.
Committee — vacancy to be filled.
Head- — and members- —+—
same process is being followed in the selection of the Chairman of — and —

Answer 19

RBI act- 1 governor and 4 DG- 2 from within the ranks and 1 commercial banker and 1 economist who will head the Monetary policy dept.
Recommends.
Cabinet secretary- additional principal sec to the PM who is a permanent govt nominee and 3 other experts.
IRDAI and SEBI

Question 20

Spread= difference between the ___ and __.

it is also called as —- on earning assets such as a loan minus —- paid on the borrowed funds.

Answer 20

Borrowing and lending rates of the fin inst.

Interest Yield- Interest rates.

Question 21

Min rate below which banks are not allowed to lend except in some cases as allowed by rbi is —-.
it is —- benchmark for the bank. Replaced the —.
calculated on the basis of — factors- they are-

Answer 21

MCLR.
Internal benchmark or reference rate- earlier base rate system.
4 factors- 1) MARGINAL cost of funds 2) Negative carry on account of the CRR 3) Operating costs 4) Tenor premium

Question 22

The mechanism through which the RBI transfers funds to the Cent govt is aka–
RBI transfers the — i.e. the excess of income over expenditure to govt acc to – of — Act.
Transfer – after the recmd of — .
ECF was reviewed by RBI under —- .

Answer 22

Economic Capital framework.
Surplus- Sec 47 (Allocation of surplus profits) of RBI act,1934.
Increased- Malegam committee(2013)
Bimal Jalan Committee.

Question 23

Bimal Jalan Committee- Defined Econ cap as- combination of —-+——
Central Bank has decided to keep this entire capital at —-.
Acc to these recmd RBI central board has —- its transfer to govt.

Answer 23

Realized equity+ revaluation reserves .
20-24.5%.
Increase.

Question 24

Issue of size of RBI contingency reserves is examined by 3 panels-

1) —– in 1997 recommended that it should be – of total assets.
2) —- in 2004 suggested it should be pegged at 18% of RBI’s assets.
3) —- in 2013 said RBI should transfer —- of profits to contingency reserves annually.

Answer 24

V Subrahmanyam- 12%.
Usha Thorat- 2004- 18%.
Y H Malegam- Adequate amount.

Question 25

Functions through which RBI generates profit- Mgmt of currency and payment systems, regulation of banks and NBFCs, Mgmt of borrowings of GoI, foreign currency assets( bond and t bills of other central banks and deposits with other central banks) ..tbc

Answer 25

Holdings of rupee denominated g secs and bonds, lending to the banks for overnight or specified period of time, mgmt commission for handling state and central govt borrowings.

Expenditure- printing notes and salaries.

Question 26

Acc to RBI, banks can avail —- on ONLY incremental retail loans given to —- betw Jan 31 and July 31, 2020 for – years.

Answer 26

CRR exemption.

MSMEs, housing sector, auto sectors. 5 yrs.

Question 27

Therefore, equivalent amt of incremental credit from — for the maintenance of —.
RBI also decided to link loans by scheduled commercial banks for medium enterprises(MSMEs) to —- from April, 2020.

Answer 27

Their NDTL- CRR.

External benchmark mainly to fasten mpt to these sectors.

Question 28

External benchmark include- — or any benchmark market interest rate produced by —- and —-.

Answer 28

Repo rate or any int rate by Fin. benchmarks India private ltd and treasury bill rates.

Question 29

CRR is — of – , — liabilities subject to zero CRR prescriptions.
Non- maintenance of CRR on —- implies — equivalent to —. ONLY ON — and ONLY post —- and ONLY for —-. Loans before this – eligible.

Answer 29

4% of NDTL- excluding liabilities subject to zero CRR prescriptions.
New loans i.e. incremental credit- deduction- NDTL.
New loans- Jan 31, 2020- 5 yrs.
NOT.

Question 30

Monetary Policy comte- constituted by —- - to determine the — to achieve —-. – members= – + – external members nominated by –
Chair-

Answer 30

RBI Act 1934- Policy interest rates- inflation targets.
6 members= 3 officials of RBI + 3 external experts nominated by GoI.
Chaired by RBI governor.

Question 31

MPC announces —- term — to the public.

— target of – with band of —

Answer 31

MEDIUM term inflation rate target- 4% with +/- 2%