CAIIB ABM flashcards
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33 cards. Read the term and the definition here. The deck at the top of this page is optional.
- NDTL
- Net Demand and Time Liabilities: the base for CRR and SLR, computed as demand deposits plus time deposits plus other liabilities to outsiders, less assets with the banking system and specified exclusions.
- CRR
- Cash Reserve Ratio: the share of NDTL that a bank must keep as cash balances with the Reserve Bank of India, earning no interest and unavailable for lending.
- SLR
- Statutory Liquidity Ratio: the share of NDTL held in cash, gold, or approved government and other securities, maintained to ensure solvency and liquidity of the bank.
- Money multiplier
- The ratio of broad money to reserve money; approximately the reciprocal of the reserve requirement ratio, showing how far an initial deposit expands into total deposits.
- CRAR
- Capital to Risk-Weighted Assets Ratio: total regulatory capital divided by risk-weighted assets, with a minimum of 9% in India plus buffers under Basel III.
- CET1 capital
- Common Equity Tier 1: the highest-quality capital, mainly paid-up equity, share premium, and retained earnings less deductions such as intangibles and deferred tax assets.
- Tier 2 capital
- Supplementary capital including general provisions, revaluation reserves, and subordinated debt, eligible within limits and subject to progressive amortisation in the final years to maturity.
- Risk-weighted assets
- Total exposure multiplied by regulatory risk weights assigned by asset class and rating, forming the denominator of the capital adequacy ratio.
- Capital conservation buffer
- A CET1 buffer of 2.5% of risk-weighted assets above the minimum CRAR, designed to absorb losses in stress; breaching it restricts dividend and bonus distributions.
- Leverage ratio
- Tier 1 capital divided by total exposure measure (on- and off-balance-sheet), a non-risk-based backstop against excessive balance-sheet build-up.
- Liquidity Coverage Ratio
- High Quality Liquid Assets divided by net cash outflows over a 30-day stress horizon; a minimum of 100% is required under Basel III.
- Net Stable Funding Ratio
- Available stable funding divided by required stable funding over a one-year horizon, limiting reliance on short-term wholesale funding for long-term assets.
- Substandard asset
- An NPA that has remained non-performing for a period up to twelve months, with provisioning generally at 15% of the secured outstanding amount.
- Doubtful asset
- An NPA remaining non-performing beyond twelve months, attracting higher provisioning that increases with the age of the account and depends on security coverage.
- Loss asset
- An asset identified as uncollectible or of negligible value, where the bank writes off the full outstanding and provisions 100%.
- Restructured advance
- A facility whose terms were modified due to borrower stress; such accounts typically carry a higher risk weight and require additional provisioning and a monitoring period.
- Net interest margin
- Net interest income divided by average earning assets; measures the spread earned on loans and investments after funding cost, expressed as a percentage.
- Return on assets
- Net profit after tax divided by average total assets; indicates how efficiently the balance sheet generates earnings and is a key profitability benchmark.
- Return on equity
- Net profit after tax divided by average shareholders' equity; measures the return delivered to owners and rises with leverage for a given return on assets.
- Cost-income ratio
- Operating expenses divided by operating income; a lower ratio signals greater operating efficiency in converting revenue into profit before provisions.
- Yield to maturity
- The single discount rate that equates the present value of all future coupons and redemption proceeds to the bond's current market price.
- Modified duration
- Macaulay duration divided by one plus the yield per period; approximates the percentage change in bond price for a one percentage point yield change.
- Convexity
- The curvature of the price-yield relationship; positive convexity means price gains from a yield fall exceed price losses from an equal yield rise.
- Repricing gap
- Rate-sensitive assets minus rate-sensitive liabilities over a chosen bucket; a positive gap raises net interest income when rates rise.
- Duration gap
- Asset duration minus the product of liability duration and the liability-to-asset ratio; measures the sensitivity of equity value to interest rate changes.
- Base rate
- The minimum lending rate below which a bank cannot lend, computed from cost of funds, negative carry on reserves, overheads, and a minimum return.
- MCLR
- Marginal Cost of Funds based Lending Rate: the internal benchmark for floating-rate loans, based on marginal cost of funds, negative carry, overheads, and tenor premium.
- Credit risk mitigation
- Reduction of capital charge through eligible collateral, guarantees, or credit derivatives, subject to regulatory haircuts and minimum eligibility conditions.
- Standardised approach
- A Basel capital framework where risk weights are prescribed by regulators or external ratings rather than derived from a bank's internal models.
- Internal ratings based approach
- A Basel framework allowing approved banks to use their own estimates of probability of default, loss given default, and exposure at default in capital computation.
- Operational risk
- Risk of loss from inadequate or failed internal processes, people, systems, or external events; under Basel, capital is computed via basic indicator or standardised approaches.
- Gap analysis
- A simple interest rate risk technique comparing assets and liabilities repricing within time buckets, ignoring time value and differences within buckets.
- Break-even load
- The asset utilisation level at which income just covers operating expenses and funding cost; above it, each incremental asset adds to net profit.