Parameter 1 Net Interest Margin

Parameter 2 RoA
Parameter 3 Cost to Income Ratio

Trigger point Situation

III 1<0; 2<0;3>100 + Accumulated Losses

II 1<0; 2<0;3>100 + No accumulated losses

III 1<0; 2>0; 3>100

II (1<0;2>0;3<100) continously for 2 years

I (1>0;2<0;) continously for 2 years

Net interest income/ Earning assets of the bank
Net Profit/ Average Assets
Operating Costs/ Operating Income

Description
Core business is not profitable; Negative net profit;
Negative operating margin (indicating that other
income is not sufficient to set off the net core
income loss)

Core business is not profitable; Operating margin is

negative; However bank arrives at a net profit
because of sale of assets, writing back of provisions
etc.
Core business is not profitable but bank has a
positive net profit due to other income. This
indicates a weak asset-liability management or a
insensitive loan portfolio (fixed rates) vs sensitive
borrowings portfolio (increasing interest rate
scenario)
Core business is profitable but bank arrives at
negative net profit due to risk costs, other non-
operating costs indicating deteriorating asset
quality beyond the income generation capacity of
the bank
Trigger points
A letter of supervisory concern to the Chief Secretary to be
sent.
Inspection should be conducted annually.

A letter of supervisory concern to the Chief Secretary to be

sent.

A thorough review of both ALM and Asset Quality of the

bank should be conducted by an independent agency
empanelled by NABARD and the report should be submitted
to NABARD/RCS/Board.
A thorough review of the bank's ALM should be conducted
by an independent agency empanelled by NABARD and the
report to be submitted to NABARD/RCS/Board

A thorough review on the asset quality of the bank should

be conducted by a independent agency empanelled by
NABARD and the report should be submitted to
NABARD/RCS/Board