JAIIB AFM cheat sheet

Bank rate is the rate at which the RBI lends long-term funds to banks against eligible securities; it anchors the marginal cost of funds.

CRR is the share of net demand and time liabilities (NDTL) kept as cash with the RBI; it earns no interest for the bank.

SLR is held in cash, gold, or approved securities and must be maintained daily as a percentage of NDTL.

Repo is a collateralised lending transaction where the borrower sells securities and agrees to repurchase them at a future date at a pre-agreed price.

Reverse repo absorbs liquidity: the RBI takes funds from banks against securities. Under the LAF, the repo rate is the policy rate.

Priority sector lending target is 40% of adjusted net bank credit (ANBC) or credit equivalent of off-balance-sheet exposure, whichever is higher.

KYC requires customer identification, verification of identity and address, and ongoing monitoring; periodic updation frequency depends on customer risk category.

NPA classification: substandard (NPA up to 12 months), doubtful (over 12 months), loss asset (identified as uncollectible).

Base rate or MCLR is the minimum lending rate; loans cannot be priced below it except in specified exempt categories.

Accounting equation: Assets = Liabilities + Capital. Every transaction preserves this equality.

Double-entry rule: debit the receiver and credit the giver; for nominal accounts, debit expenses/losses and credit incomes/gains.

Trial balance tests arithmetical accuracy only; it cannot detect errors of principle or compensating errors.

Bank balance sheet order follows the Banking Regulation Act format: capital and liabilities first, then assets, with schedules 1-16.

Revenue recognition is on accrual basis; income is recognised when earned, not when received, subject to prudence.

Net interest income = interest income minus interest expense; net interest margin = NII divided by average earning assets.

CASA ratio = (current account + savings account deposits) / total deposits; a higher ratio lowers cost of funds.

Capital adequacy: CRAR = (Tier 1 + Tier 2 capital) / risk-weighted assets; minimum is 9% under RBI norms.

Depreciation allocates the depreciable cost of a fixed asset over its useful life; it is a non-cash expense affecting profit, not cash.

Negotiable Instruments Act, 1881 covers promissory notes, bills of exchange, and cheques; a cheque is a bill of exchange drawn on a banker payable on demand.

Section 138 NI Act: dishonour of a cheque for insufficient funds is an offence if the cheque was for a legally enforceable debt and notice is given within 30 days of dishonour.

Payment in due course under Section 10 NI Act discharges the paying banker when made in good faith and without negligence to a person entitled to receive.

Banker's obligation to honour cheques arises under Section 31 NI Act; wrongful dishonour exposes the bank to damages for loss of credit.

Statutory protection for paying banker: Sections 85 and 89 NI Act protect payment of a crossed cheque and payment in good faith.

Collecting banker's protection under Section 131 NI Act applies when the bank collects in good faith and without negligence for a customer.

Banker's lien (Section 171 Indian Contract Act) gives the bank a general lien on goods and securities in its possession until dues are settled.

SARFAESI Act, 2002 allows enforcement of security interest without court intervention for secured debts in default, after a 60-day notice under Section 13(2).

Limitation Act, 1963: a suit for recovery on a debt must be filed within three years from the date the debt becomes due; acknowledgement restarts limitation.

Retail loans are typically priced on a floating benchmark (repo-linked or MCLR) plus a spread; EMI = P x r x (1+r)^n / ((1+r)^n - 1), where r is the monthly rate.

Loan-to-value (LTV) caps for home loans depend on ticket size; higher LTV means higher credit risk and a higher risk weight.

Credit card minimum due is a percentage of the outstanding; paying only the minimum keeps the account standard but incurs finance charges on the unpaid balance.

Risk profiling of a client covers risk tolerance, time horizon, liquidity needs, and investment objective; asset allocation follows from this profile.

SIP is a periodic investment plan in a mutual fund; rupee-cost averaging reduces the impact of volatility over time.

Diversification reduces unsystematic risk; systematic (market) risk cannot be eliminated by diversification.

Debt mutual fund NAV falls when interest rates rise; duration measures the sensitivity of bond prices to rate changes.

KYC and suitability requirements apply to wealth products; the bank must document the client's risk profile before recommending products.

NPS offers tax benefits and a mandatory annuity portion at exit; PPF has a fixed tenure and sovereign guarantee with EEE tax treatment.