CBI Credit Officer flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

DSCR

Debt Service Coverage Ratio equals cash available for debt service divided by interest plus principal repayment due. A ratio of 1.50 or above is generally considered comfortable in term loan appraisal.

MPBF

Maximum Permissible Bank Finance under the Nayak Committee method equals 0.75 times current assets minus current liabilities excluding bank borrowings, for turnover up to Rs.5 crore.

Drawing power

The limit up to which a borrower may draw against a working capital facility, computed as paid stock plus acceptable book debts minus the stipulated margin, after stock verification.

FOIR

Fixed Obligation to Income Ratio divides a borrower's total fixed monthly obligations by net monthly income. Retail lenders typically cap it between 50% and 65%.

Loan-to-Value ratio

LTV equals loan amount divided by the value of the security. It is the inverse of margin; lower LTV means higher borrower contribution and lower lender risk.

Priority sector target

Domestic scheduled commercial banks must lend 40% of Adjusted Net Bank Credit to priority sectors, including 18% to agriculture and 7.5% to micro enterprises.

CRR

Cash Reserve Ratio is the share of Net Demand and Time Liabilities that banks must hold as cash with the RBI. It earns no interest and is used to drain liquidity.

SLR

Statutory Liquidity Ratio is the portion of NDTL banks must hold in cash, gold or approved securities. It is currently 18% of NDTL and is maintained in India.

Basel III CET1

Common Equity Tier 1 is the highest quality capital, comprising paid-up equity and retained earnings. The minimum CET1 requirement is 5.5% of risk-weighted assets.

DICGC cover

Deposit Insurance and Credit Guarantee Corporation insures deposits up to Rs.5 lakh per depositor per bank, covering both principal and accumulated interest in the insured amount.

CGTMSE

Credit Guarantee Fund Trust for Micro and Small Enterprises provides guarantee cover for collateral-free loans to MSMEs, enabling banks to lend without demanding security.

RTGS

Real Time Gross Settlement settles high-value interbank payments individually and in real time. The minimum transaction value for RTGS is Rs.2 lakh, with no upper limit.

Current ratio

Current assets divided by current liabilities. A ratio near 1.33 to 2 indicates adequate liquidity; a ratio below 1 signals potential inability to meet short-term obligations.

Debt-equity ratio

Total outside liabilities divided by tangible net worth. A ratio above 2:1 generally indicates high leverage and is a common red flag in credit appraisal.

Interest coverage ratio

Earnings before interest and tax divided by interest expense. It shows how many times operating profit covers interest; values below 1.5 raise repayment concerns.

Working capital cycle

Inventory days plus receivable days minus payable days. A lengthening cycle absorbs cash, increases working capital demand and may signal weak collection or slow-moving stock.

EBITDA

Earnings before interest, tax, depreciation and amortisation approximates operating cash generation. It is used to assess debt servicing capacity before financing and accounting effects.

MCLR

Marginal Cost of Funds based Lending Rate is the minimum rate below which a bank cannot lend, except as permitted. It is published for tenors from overnight to one year.

Large Exposure Framework

RBI caps a bank's exposure to a single counterparty at 20% of Tier 1 capital and to a group of connected counterparties at 25%, with extra allowance for infrastructure.

IRAC norms

Income Recognition, Asset Classification and Provisioning norms require classifying NPAs as substandard, doubtful or loss, with provisioning percentages rising across these categories.

PSL certificates

Priority Sector Lending Certificates let banks buy and sell priority sector achievement without transferring the underlying loan assets, helping meet the 40% target.

Suspicious Transaction Report

An STR is filed with FIU-IND when a transaction appears linked to proceeds of crime or has no apparent economic purpose. It must be filed within seven working days of suspicion.

Politically exposed person

A PEP is an individual entrusted with prominent public functions, plus family members and close associates. PEPs require enhanced due diligence and senior management approval before onboarding.

Beneficial owner threshold

For companies, beneficial owners are natural persons holding 25% or more of shares or control. For partnerships and trusts, ownership or entitlement thresholds also apply.

Placement layering integration

These are the three stages of money laundering: placing illicit funds into the financial system, layering transactions to obscure origin, and integrating funds as apparently legitimate wealth.

CTR threshold

A Cash Transaction Report is filed with FIU-IND for cash transactions above Rs.10 lakh, or as prescribed, to detect unusual cash activity in customer accounts.

Inflation target

India's flexible inflation targeting framework sets CPI inflation at 4% with a tolerance band of plus or minus 2%. The six-member Monetary Policy Committee decides the repo rate.

Fiscal deficit

Total expenditure minus total receipts excluding borrowings. It shows how much the government must borrow and is financed through dated securities and treasury bills.

Repo rate

The rate at which the RBI lends short-term funds to banks against government securities. It is the principal policy rate and anchors other lending rates.

Compound interest formula

Compound interest equals P times [(1 + R/100)^T minus 1]. For two years, the difference between compound and simple interest equals P times (R/100) squared.

Time and work formula

If A completes work in x days and B in y days, together they finish in xy divided by (x + y) days. Work rates add when people work simultaneously.

Subject-verb agreement

A singular subject takes a singular verb. With either-or and neither-nor constructions, the verb agrees with the subject nearer to it in the sentence.