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Friends, Updating here the recollected questions from June 2019 Exams. Wish you all the very best for your exam.
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ABC Bank has the following re-pricing assets and liabilities (Rs. in crores):
Call Money - 600
Cash Credit Loans - 480
Cash in Hand - 500
Saving Bank - 600
FD - 600
Current Depost - 600
Now, answer the following based on the above information.
1. What is the adjusted gap in re-pricing assets and liabilities?
a. 100 Cr
b. 120 Cr
c. 140 Cr
d. 160 Cr
Ans - b
Adjusted gap :
= (SB + FD) - (Call money + CC)
= (600 + 600) - (600 + 480)
= 1200 - 1080
= Rs.120cr (Rs. 120 cr Negative Gap, because assets are less than liabilities)
The cash in hand and current account deposits are not subject to re-pricing as these are not interest bearing, hence these have been ignored.
2. What is the change in NII, if interest rate falls by 3% points for all assets and liabilities?
a. Rs. 2.40cr increase in NII
b. Rs. 3.60cr increase in NII
c. Rs. 2.40cr decrease in NII
d. Rs. 3.60cr decrease in NII
Ans - b
There is negative gap (interest bearing liabilities more) of Rs.120cr [(600+600)-(600+480)].
Which means the interest cost declines @2% on this negative gap, which leads to increase in NII.
Hence it is Rs.120cr * 3% = Rs. 3.60cr increase in NII
3. What is the change in NII, if interest rate increase by 3% points for all assets and liabilities?
a. Rs. 2.40cr increase in NII
b. Rs. 3.60cr increase in NII
c. Rs. 2.40cr decrease in NII
d. Rs. 3.60cr decrease in NII
Ans - d
There is negative gap (interest bearing liabilities more) of Rs.120cr [(600+600)-(600+480)].
Which means the interest cost increases @3% on this negative gap, which leads to decline in NII.
Hence it is Rs.120cr * 3% = Rs. 3.60cr decline in NII
4. What is the change in NII, if interest rate falls on call money by 1%, SB by 0.2%, FD by 1% and CC by 0.6%?
a. Rs. 1.48cr increase in NII
b. Rs. 1.68cr increase in NII
c. Rs. 1.48cr decrease in NII
d. Rs. 1.68cr decrease in NII
Ans - b
Fall in interest income in case of assets
= (Call- 600 * 1% = 6.00cr) + (Cash credit- 480 * 0.6% = 2.88)
= Rs.8.88cr.
Fall in interest expenses in case of liabilities
= (SB- 600 * 0.2 = 1.20cr) + (FD- 600 + 1% = 6.00 cr)
= 7.20cr
Net Decline = 8.88cr - 7.20cr = 1.68cr
5. What is the change in NII, if interest rate increases on call money by 0.5%, SB by 0.1%, FD by 0.8% and CC by 1%?
a. Rs. 2.40cr increase in NII
b. Rs. 3.60cr increase in NII
c. Rs. 2.40cr decrease in NII
d. Rs. 3.60cr decrease in NII
Ans - a
Increase in interest amount in case of assets :
= (Call- 600 * 0.5% = 3.00cr) + (Cash credit- 480 * 1% = 4.80)
= Rs.7.80cr.
Increase in interest amount in case of liabilities :
= (SB- 600 * 0.1 = 0.60cr) + (FD- 600 * 0.8% = 4.80cr)
= 5.40cr
Net improvement = 7.80cr - 5.40cr = 2.40cr
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