To Prepare For

JAIIB/CAIIB Exams
 CAIIB BFM FORMULAE QUICKSHEET FOR 2023
Module A
EXCHANGE RATES AND FOREX BUSINESS
Forward rate = Spot rate + Premium (or – Discount)
(a) Departure:
(i) Ex-works (named place) e.g Ex-works
Jamnagar, or Ex-works Pune.
(b) Main carriage paid.
(i) CFR: cost and freight (named port of
destination) e.g. CFR JNPT CFR Chennai
(ii) CIF: cost, insurance and Freight (named port
of destination) e.g. CIF JNPT, or CIF Chennai
port,
(iii) CPT: Carriage Paid To (named place of
destination) e.g., CPT Dubai
(iv) CIP: Carriage and Insurance Paid to (named
place of destination) CIP Dubai
(c) Main carriage Unpaid:
(i) FCA: Free Carrier (named place) eg. FCA
Mumbai
(ii) FAS: Free Alongside Ship (named port of
shipment) e.g., FAS Mumbai port
(iii) FOB: Free On Board (Named place of
shipment) e.g., FOB Mangalore
(d) Arrival;
(i) DAT: Delivered At Terminal (named terminal
at port or place of destination) e.g, DAT
Sharjah
(ii) DPU: Delivered At Place Unloaded (named
place of unloading) e.g., DAP Sharjah
(iii) DDP: Delivered Duty Paid (named place of
destination) e.g., DDP Sharjah

Incoterm EXW FAS FCA FOB CFR CIF CPT CIP DPU DAT DDP
------------------------------------------Obligations and Charges---------------------------------------
Warehouse Service Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Export Packing Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Loading at port of origin Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Origin Inland Freight Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Origin Port Charges Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Origin Forwarders Fees Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Ocean and Air freight Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller
Destination port Charges Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller
Customs Clearance Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller
Customs Duties Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller

Forward Differential = spot × interest differential ×
period / 12 M
For cross currency calculations:
In a “Two Way Quote”
Bid Rate should always be multiplied to Bid Rate
Ask Rate should always be multiplied to Ask Rate
TT buying rate Calculation = Spot Rate - Exchange
Margin
TT Selling rate Calculation = Spot Rate + Exchange
Margin
The formula for calculating the forward rate is:-
{(1+Home currency interest rate)/(1+foreign currency
interest rate)} = End of the period forward rate/Spot
rate
Forward premium = (Forward rate - Spot rate)/Spot
rate

For Free Study Material Subscribe now

Exchange Rate Mechanism: Types and Calculation Bill Buying rate Calculation = Spot Rate + Forward
Ready or Cash: T+0 Premium (or deduct forward discount) - Exchange
Tom: T+1
margin.
Spot: T+2
Bill Selling rate Calculation= Spot Rate + Exchange
Forward: After T+2
Forward rate = Spot Rate + Premium (or – Discount). Margin for TT Selling+ Exchange margin for bill selling

Module B
Cookie Ratio/Capital adequacy ratio = {(Tier – 1 + Tier -2)/Total risk weighted assets}*100
Table 24: Minimum capital conservation standards for individual bank
Common Equity Tier 1 Ratio after including the Minimum Capital Conservation Ratios (expressed as
current period retained earnings a percentage of earnings)
5.5% - 6.125% 100%
>6.125% - 6.75% 80%
>6.75% - 7.375% 60%
>7.375% - 8.0% 40%
>8.0% 0%

BPV formula = Change in Value*0.01/Change in Standard hair cut for currency risk- 8% (i.e.
Interest Rate or Yield = ∆V*0.01/∆Y exposure/collateral in different currencies)
Gold (99.99 purity)- 15%
Hair cut
Unrated securities- 25%
Central or State Govt. securities
Calculation of capital requirement:
Residual maturity E* = max {0, [E x (1 +He)-C x (1-Hc-Hfx)]}
up to 1 year- 0.5% E* = exposure value after risk mitigation
> 1 year to up to 5 years- 2% E=Current value of exposure
> 5 years- 4% He=Haircut appropriate to exposure
Domestic Debt Securities (Rated AAA, AA or A1) C= current value of collateral
Hc= Haircut appropriate to collateral
Residual maturity
Hfx = haircut appropriate for currency mismatch
up to 1 year- 1%
between collateral and exposure
>1 year to up to 5 years- 4%
If collateral is a basket of assets, haircut = sum total
> 5 years- 8%
of a1H1
Domestic Debt Securities (Rated A, BBB) Residual a1= weight of assets in basket
maturity H1 = haircut applicable to that asset
up to 1 year- 2% C*= Cx(1-Hc-Hfx) x mf
>1 year to up to 5 years- 6% E*= max { 0, [E x (1 +He)-C* ]}
> 5 years - 12% Mf= t-0.25/T-0.25
t= Collateral Maturity
Cash (FD, CD), NSC, KVP, LIP in same currency- 0% T=Exposure Maturity

For Free Study Material Subscribe now

 HFX MF (Maturity Factor) Maturity mismatch
Exposure Collateral Hfx Exposure Maturity Collateral Maturity Mf
INR INR 0 6 years 6 years 1
$ $ 0 3 years 6 months 0
€ € 0 5 years 4 years As per formula
INR $ 0.08 (8%) 4 years 5 years As per formula
$ INR 0.08 (8%)
$ € 0.08 8%

ALTMAN Z SCORE
Accounting Ratios Code Weight
Working Capital/Total Assets X1 1.2
Retained Earnings/Total Assets X2 1.4
Earning before interest & Tax/Total Assets X3 3.3
Market value of equity/Total Lability (Long Term Debt) X4 0.6
Sales/Total Assets X5 1.0
𝑍 = 1.2𝑋1 + 1.4𝑋2 + 3.3𝑋3 + 0.6𝑋4 + 1𝑋5
Formula No. 2:
Value at Risk (VaR) • Gross Income = Operating Profit + Expenditure
VaR= Volume x Volatility x Probability (Z value) incurred under Schedule 16 – minus profit on HTM
and irregular / non – banking transaction income
Z Value at 99% confidence Level: 2.33 / income from non-banking transactions (such as
Z Value at 95% confidence Level: 1.65 insurance etc.)
Z Value at 90% confidence Level: 1.28 • Operating Profit = Net Profit + Provision &
Yearly Volatility = Daily Volatility x √ No. of days Contingences.

Operating profit = Revenues - Cost of goods sold - Formula No. 3:

operating expenses - depreciation
Gross income = Net Interest Income + Net non Interest
Income
Capital Charge = Gross Income × Alpha factor
Where alpha-factor = 15%
Formula No. 1.
• Gross income = Net Profit + Provision &
Contingencies + Expenditure incurred under
schedule 16 – minus profit on HTM and irregular /
non – banking transaction income. / income non-
banking transactions (such as insurance etc).
• Gross Income is defined as the net interest income
plus non – interest income.
• Non – Interest income excludes the profits/losses
arising out of the following:
o HTM transactions.
o Income from insurance business
o Any irregular / non-banking transactions.
Eight Business Line Beta Factors
1. Corporate finance (high risk factor): 18%
2. Trading and Sales (high risk factor): 18%
3. Retail Banking (low risk factor): 12%
4. Commercial banking (moderate risk factor): 15%

For Free Study Material Subscribe now

5. Payment and Settlement (high risk factor): 18% RAR → 12%
6. Agency Services (moderate risk factor): 15% (a) Average of [Gross Income * alpha] for each of the
7. Asset Management (low risk factor): 12% last three financial years, excluding years of
8. Retail Brokerage (low risk factor): 12% negative or zero gross income.
(b) Gross income = Net profit (+) Provisions &
Trick: →
contingencies (+) operating expenses
CA → 15%
(c) Alpha = 15 percent.
CPT → 18%

Individual bank minimum capital conservation ratios, assuming a requirement of 2.5% each of capital
conservation buffer and CCCB
Common Equity Tier 1 Ratio bands Minimum Capital Conservation Ratios (expressed as % of earnings)
>5.5% - 6.75% 100%
>6.75% - 8.0% 80%
>8.0% - 9.25% 60%
>9.25% - 10.50% 40%
>10.50% 0%

Duration: -
Macaulay’s Duration was first proposed by Frederick
Macaulay in 1938 as a means of
describing a bond’s price sensitivity to yield change
with a single number.
Duration = Cumulative Revised Price/Revised Price
Modified Duration = Duration/ (1+r)
Approx % change in price = - modified duration X yield
change
Price Volatility = (Yield volatility × BPV × Yield)/Price

RATIO IN RESPECT OF LIQUIDITY RISK MANAGEMENT

Industry
Sr.No. Ratio Significance Average
(in %)
(Volatile liabilities – Measures the extent to which volatile money supports
Temporary bank’s basic earning assets. Since the numerator represents
1. 40
Assets)/(Earning Assets short-term, interest sensitive funds, a high and positive
– Temporary Assets number implies some risk of illiquidity.
Core deposits/Total Measures the extent to which assets are funded through
2. 50
Assets stable deposit base
(Loan + mandatory SLR Loan including mandatory cash reserves and statutory
+ mandatory CRR + liquidity investments are least liquid and hence a high ratio
3. 80
Fixed Assets)/Total signifies the degree of ’illiquidity’ embedded in the balance
Assets sheet
(loan + mandatory SLR +
Measure the extent to which illiquid assets are financed out
4. mandatory CRR + Fixed 150
of core deposits.
Assets)/Core Deposits

For Free Study Material Subscribe now

 Industry
Sr.No. Ratio Significance Average
(in %)
Measures the extent of available liquid assets. A higher ratio
Temporary
5. could impinge on the asset utilization of banking system in 40
Assets/Total Assets
terms of opportunity cost of holding liquidity.

Temporary Measures the cover of liquid investments relative to volatile

6. Assets/Volatile liabilities. A ratio of less than 1 indicates the possibility of a 60
Liabilities liquidity problem.

Volatile Liabilities Measure the extent to which volatile liabilities fund the
7. 60
/Total Assets balance sheet

Volatile Liabilities: (Deposits + borrowings and bills
payable up to 1 years). Letters of credit – full
outstanding. Component – wise CCF of other
contingent credit and commitments. Swap funds
(buy/sell) up to one year. Current deposits (CA) and
Saving deposits (SA) i.e. (CASA) deposits reported by
the banks as payable within one year (as reported in
structural liquidity statements) are included under
volatile liabilities. Borrowings include from RBI, call,
other institutions and refinance.
Temporary assets = Cash + Excess CRR balances with
RBI + Balances with banks + Bills purchase/discounted
up to 1 year + Investments up to one year + Swap
funds (sell/buy) up to one year.
Earning Assets = total Assets – (Fixed assets +
Balances in current accounts with other banks + Other
assets excluding leasing + intangible assets).
Core deposits = All deposits (including CASA) above 1
year (as reported in structural liquidity statements +
net worth
Net Stable Funding Ratio: (Available Stable
Funding/Required Stable Funding) > or = 100%
LCR: The stock of High-Quality Liquid Assets/Total Net
Cash outflows over the next 30 calendar days

Frequency of Time period of which Required to

Sr.No. Name of Basel III Liquidity Return (BLR)
Submission be Reported
Statement on Liquidity Coverage Ratio
1. Monthly Within 15 days
(LCR) – BLR – 1
Statement of Funding concentration –
2. Monthly Within 15 days
BLR – 2
Statement of Available Unencumbered
3. Quarterly Within a month
Assets – BLT – 3
4. LCR by Significant Currency – BLR – 4 Monthly Within a month
Statement on Other Information of
5. Monthly Within 15 Days
Liquidity - BLR – 5

Average receivables = (Total credit sales/360) * Average collection period

Loan to Value Ratio = (Loan amount sanctioned/Apprised value of the property) x 100.

For Free Study Material Subscribe now

Leverage ratio calculation : It is calculated as under: Exposure measure : Total exposure measure include:
Capital measure/ exposure measure x 100 (1) on-balance sheet exposure
Minimum Tier-1 leverage ratio in India : 3.5% (4% for (2) derivative exposures
systemically important banks) (3) securities financing transaction exposure
Capital measure : For leverage ratio purpose. it is Tier- (4) off-balance sheet items.
1 capital (a component of Capital Fund).

For Free Study Material Subscribe now

 CREDIT CONVERSION FACTORS — NON-MARKET
RELATED OFF-BALANCE SHEET ITEMS

Credit
Sr. No. Instruments Conversion
Factor (%)
Direct credit substitutes e.g., general guarantees of indebtedness (including standby
L/Csserving as financial guarantees for loans and securities, credit enhancements,
liquidity facilities for securitization transactions), and acceptances (including
1. 100
endorsements with the character of acceptance). (i.e., the risk of loss depends on
the credit worthiness of the counterpart), or the party against whom a potential
claim is acquired)
Certain transaction-related contingent items (e.g. performance bonds, bid bonds,
2. warranties, indemnities and standby letters of credit related to particular 50
transaction).
Short-term self-liquidating trade letters of credit arising from the movement of
3. goods (e.g. documentary credits collateralized by the underlying shipment) 20 for 20
both issuing bank and confirming bank.
Sale and repurchase agreement and asset sales with recourse, where the credit risk
remains with the bank. (These items are to be risk weighted according to the type
4. 100
of asset and not according to the type of counterparty with whom the transaction
has been entered into.)
Forward asset purchases, forward deposits and partly paid shares and securities,
which represent commitments with certain drawdown. (These items are to be risk
5. 100
weighted according to the type of asset and not according tote type of counterparty
with whom the transaction has been entered into.)
Lending of banks' securities or posting of securities as collateral by banks, including
6. instances where these arise out of repo style transactions (i.e., repurchase/reverse 100
repurchase and securities lending/securities borrowing transactions)
7. Note issuance facilities and revolving/non-revolving underwriting facilities. 50
8. Commitments with certain drawdown 100
Other commitments (e.g., formal standby facilities and credit lines) with an original
maturity of
a) Up to one year 20
9. b) Over one year 50
Similar commitments that are unconditionally cancellable at any time by the bank 0
without prior notice or that effectively provide for automatic cancellation due to
deterioration in a borrower’s credit worthiness*
Take-out finance in the book of taking – over institution
100
10. (i) Unconditional take – out finance
50
(ii) Conditional take – out finance

For Free Study Material Subscribe now

 Credit conversion factors%
Interest rate contracts Exchange rate contracts and gold
Over year or less 0.50 2.00
Over one year to five years 1.00 10.00
Over five years 3.00 15.00

India Rating and Standardized Approach

SMERA Rating
CARE CRISIL Research Private ICRA Brickwork Risk Weights (in
Ltd. (SMERA)
Limited (India Ratings) percent)
ICRA
CARE CRISIL IND AAA Brickwork SMERA 20
AAA
AAA AAA
CARE CRISIL ICRA Brickwork
IND AA SMERA AAA 30
AA AA AA AA
CARE CRISIL Brickwork
IND A ICRAA SMERAA 50
A A A

India Rating and

SMERA Standardized
Research Private
CARE CRISIL ICRA Brickwork Rating Ltd. Approach Risk
Limited (India
(SMERA) Weights (in percent)
Ratings)
CARE CRISIL ICRA Brickwork
IND BBB SMERA 100
BBB BBB BBB BBB
BBB
CARE CRISIL Brickwork
IND BB, IND ICRA BB SMERA BB, 150
BB, BB, BB,
Brickwork
CARE B, CRISIL B, B, IND C & ICRA B, SMERA B,
B,
CARE CRISIL C Brickwork
IND D ICRAC & SMERA C &
C& & C&
Brickwork
CARE D CRISIL D ICRA D SMERA D
D
Unrated Unrated Unrated Unrated Unrated Unrated 100

For Free Study Material Subscribe now

 India Rating and
Standardized
Research Private SMERA Rating
CARE CRISIL ICRA Brickwork Approach Risk
Limited (India Ltd. (SMERA)
Weights (in percent)
Ratings)
CARE CRISIL ICRA Brickwork
IND A1+ SMERA A1+ 20
AI+ AI+ A1+ A1+
CARE CRISIL Brickwork
IND A1 ICRAA1 SMERAA1 30
A1 A1 A1
CARE CRISIL Brickwork
IND A2 ICRAA2 SMERAA2 50
A2 A2 A2
CARE CRISIL Brickwork
IND A3 ICRAA3 SMERAA3 100
A3 A3 A3
CARE CRISIL Brickwork
IND A4 ICRAA4 SMERAA4 150
A4 A4 A4
&D &D &D &D &D
Unrated Unrated Unrated Unrated Unrated Untreated 100

Components of Balance Sheet: Liabilities Side Assets Side of Banker’s Balance Sheet
Schedule Schedule
Capital and Liabilities Amount Assets Amount
No. No.
1. Capital 1 1. Cash in Hand in Balance with RBI 6
2.Reserves and 2 2. Balances with other banks, money
Surplus 3 at call end at short notice 7
3. Deposits 4 3. Investments
4. Borrowings 5 4. Advances
5. Other liabilities and 5. Fixed Assets 8
provisions 6. Other assests 9
10
11

Banking Regulation and Capital

Common Tier Equity 𝐶𝑜𝑚𝑚𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 𝑇𝑖𝑒𝑟 1 𝐶𝑎𝑝𝑖𝑡𝑎𝑙

=
1 ratio capital 𝐶𝑟𝑒𝑑𝑖𝑡 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴 ∗ +𝑀𝑎𝑟𝑘𝑒𝑡 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴 + 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴
𝐸𝑙𝑖𝑔𝑖𝑏𝑙𝑒 𝑇𝑖𝑒𝑟 1 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
Tier 1 ratio Capital =
𝐶𝑟𝑒𝑑𝑖𝑡 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴 ∗ +𝑀𝑎𝑟𝑘𝑒𝑡 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴 + 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴
𝐸𝑙𝑖𝑔𝑖𝑏𝑙𝑒 𝑇𝑜𝑡𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
Total (CRAR*) Capital =
𝐶𝑟𝑒𝑑𝑖𝑡 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴 + 𝑀𝑎𝑟𝑘𝑒𝑡 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴 + 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙 𝑅𝑖𝑠𝑘 𝑅𝑊𝐴
* RWA = Risk weighted Assets
# Capital to Risk Weighted Asset Ratio

For Free Study Material Subscribe now

 Regulatory Capital Ratio (% of Risk Weighted Assets) Ratio Prescribed by RBI
Tier – I Tier – II Total CCB Grand Total
CET – 1 AT
2% 9% 2.5% 11.5%
5.5 % 1.5%

Consequence of not maintaining regulatory capital ratios : PCA (Prompt Corrective Action)
Capital (Limits and Minima)
➢ Common Equity Tier 1 (CET1) capital must be at
least 5.5% of risk-weighted assets (RWAs)i.e. for
credit risk + market risk + operational risk on an
ongoing basis.
➢ Tier 1 capital must be at least 7% of RWAs on an
ongoing basis.
➢ Within the minimum Tier 1 capital, Additional Tier
1 capital can be admitted maximum at 1.5% of
RWAs.
➢ Total Capital (Tier 1 Capital plus Tier 2 Capital)
must be at least 9% of RWAs on an ongoing basis.
➢ Within the minimum CRAR of 9%, Tier 2 capital can
be admitted maximum up to 2%.
➢ in addition to the minimum CETI capital of 5.5% of
RWAs, banks are also required to maintain a
capital conservation buffer(CCB) of 2.5% of RWAs
in the form of CET1 capital.

Regulatory Capital AS% to RWAs

(i) Minimum common equity Tier 1 Ratio 5.5
(ii) Capital conservation buffer (comprised of common equity) 2.5
(iii) Minimum common Equity Tier 1 Ratio plus capital conservation buffer [(i) + (ii)] 8.0
(iv) Additional Tier 1 capital 1.5
(v) Minimum Tier 1 capital ratio [((i) + (iv)] 7.0
(vi) Tier 2 Capital 2.0
(vii) Minimum total Capital Ratio (MTC) [(V) + (Vi)] 9.0
(viii) Minimum Total capital Ratio Plus Capital conservation Buffer [(vii) + (ii)] 11.5

Horizontal Disallowances
Zones Time band Within the Zones Between Adjacent Zone Between Zones 1 and 3
1 month or less 40%
1 to 3 months
Zone 1 40%
3 to 6 months
6 to 12 months
100%
1.0 to 1.9 years
Zone 2 1.9 to 2.8 years
30%
2.8 to 3.6 years
Zone 3 3.6 to 4.3 years

For Free Study Material Subscribe now

 Horizontal Disallowances
Zones Time band Within the Zones Between Adjacent Zone Between Zones 1 and 3
4.3 to 5.7 years
5.7 to 7.3 years
7.3 to 9.3 years
9.3 to 10.6 years 30%
10.6 to 12 years
12 to 12 years 40%
Over 20 years

Module C
Strike vs. Market Rate CALL Option PUT Option
Strike rate above market Out the money In the money
Strike rate = market At the money At the money
Strike rate below market In the money Out the money

Sr. No Participant Category Prudential Limit

1. Scheduled Commercial Call and Notice Money:
Banks (i) 100% of capital funds, on a daily average basis in a reporting
(including Small Finance fortnight, and
Banks) (ii) 125% of capital funds on any given day.
Term Money:
Internal board approved limit within the prudential limits for inter-
bank liabilities
2. Payments Banks, and Call, Notice and Term Money:
Regional Rural Banks (i) 100% of capital funds, on a daily average basis in a reporting
fortnight, and
(ii) 125% of capital funds on any given day.
3. Co-operative banks Call, Notice and Term Money:
2.0% of aggregate deposits as at the end of the previous financial year.
4. Primary Dealers Call and Notice Money:
225% of Net Owned Fund (NOF) as at the end of the previous financial
year on a daily average basis in a reporting fortnight.
Term Money:
225% of Net Owned Fund (NOF) as at the end of previous financial
year.

For Free Study Material Subscribe now

Components of Demand Liability are:
(a) Current deposits,
(b) Demand liabilities portion of savings bank
deposits,
(c) Margins held against letter of credit/guarantees,
(d) Balances in overdu3e fixed deposits, cash
certificates and cumulative/recurring deposits,
(e) Outstanding telegraphic transfers (𝑇𝑇𝑠 ), Mail
Transfers (𝑀𝑇𝑠 ) Demand Drafts (𝐷𝐷𝑠).
(f) Unclaimed deposits,
(g) Credit balances in the Cash Credit account,
(h) Deposits held as security for advances which are
payable on demand.
Components of Time Liabilities are:
‘Time Liabilities’: Time Liabilities of a bank shall
include those liabilities which are payable otherwise
than on demand and shall include the following:
(a) Fixed deposits
(b) Cash certificates
(c) Cumulative and recurring deposits,
(d) Time liabilities portion of savings bank deposits,
(e) Staff security deposits
(f) Margin held against letters of credit, if not payable
on demand,
(g) Deposits held as securities for advances which are
not payable on demand
(h) Gold deposits
Scheduled Commercial Banks are exempted from
maintaining CRR on the following liabilities:
Module D
NII= Interest earned- Interest expended
Rate Sensitive asset= Total Asset-Non sensitive asset
Rate Sensitive liability= Total liability-Non sensitive
liability
Calculate weight (W) = RSL/RSA
Risk Sensitive Asset (RSA)
Risk Sensitive Liability (RSL)
DGAP (modified duration gap) = DA - (W*DL)
Weight Modified Duration of Asset (DA)
For Free Study Material
• Liabilities to the banking syste3m in India as
computed under clause (d) of the explanation to
section 42 (1) of the RBI Act, 1934.
• Credit balances in ACU (US) Accounts.
• Demand and Time Liabilities in respect of their
Offshore Banking Units (OBUs).
The following liabilities are excluded from the CRR
stipulation:
• Paid – up capital, reserves, retained profits,
refinance availed from RBI and apex financial
institutions like NABARD and SIDBI’
• Net income tax provision.
• Claims received from DICGC, ECGC, Insurance
Company (Towards ad – hoc settlement), Court
receiver etc.
• Liabilities arising on account of utilization of limits
under Bankers’ Acceptance Facility.
• District Rural Development Agency (DRDA)
subsidy of Rs. 10,000/- kept in Subsidy Reserve
Fund account in the name of Self Help Groups.
• Subsidy released by NABARD under Investment
Subsidy Scheme for construction/Renovation/
Expansion of Rural Godowns.
• Net unrealized gain/loss arising from derivatives
transaction under trading portfolio; Income flows
received in advance such as annual fees and other
charges which are not refundable.
• Bill rediscounted by a bank with eligible financial
institutions as approved by RBI.
Weight Modified Duration of Liability (DL)
Leverage ratio= RSA/ Net worth
Modified duration of equity (MD) = DGAP * leverage
ratio
Equity value=Change in rate (BP)*MD
Stock Approach
Core deposit/total assets: Higher ratio better
Net loans/Total Deposits: Lower Ratio better
Time deposits/total deposits: higher ratio better
Subscribe now
Volatile liabilities/ total assets: Lower Ratio better
Short-Term liabilities/ liquid assets: Lower Ratio
better
Liquid assets / total assets: higher ratio better
Short-term liabilities / Total assets: Lower Ratio better
NPA on account of erosion in the value of security.
If realizable value of security is less than 50% the
account will be shifted to Doubtful category directly.
If realizable value of security is less than 10% then the
account will be shifted to loss asset directly.

Prime assets / total assets: higher ratio better
Market liabilities / total assets: Lower Ratio better
NPA:
(i) 150 per cent risk weight when specific provisions
are less than 20 per cent of the outstanding
amount of the
NPA;
(ii) 100 per cent risk weight when specific provisions
are at least 20 per cent of the outstanding amount
of the
NPA;
(iii) 50 per cent risk weight when specific provisions
are at least 50 per cent of the outstanding amount
of the NPA
COMPUTATION OF GROSS ADVANCES,
GROSS NPA, NET ADVANES, AND NET NPA
Gross advances = Standard assets plus gross NPA
Gross NPA as percentage of gross advances = Gross
NPA/gross advances
Net advances = Gross advances – deductions
Deductions-
- Provisions held in the case of NPA accounts
- DICGC/ECGC claims received and held pending
adjustment
- Part payment received and kept in suspense a/c or
similar
E. Net NPA = Gross NPA-Deductions
F. Net NPA as % of net advances=Net NPA/Net
advances
PCR = proving to NPA/Gross NPA*100

CATEGORY PROVISION REQUIREMENTS

Standard Agri. & SME sector Resi. Housing Loans. & CRE All other loans and advances
assets. 0.25% 0.75% & 1.00% 0.40%
Sub-standard Secured sub-standard Un secured Sub-Standard
assets. 15% of out standing 25 of out standing
Doubtful First 12 months Next 24 months Over 36 months
assets. Secured: 25% Secured: 40% 100 % uniformly
Unsecured: 100% Unsecured:100%
Loss assets: The entire assets should be writtern off. If permitted to remain in the books for any reason,
100% of the outstanding should be provided for.

SMA Sub-
Basis for classification
categories
SMA - 0 Principal or interest payment not overdue for more than 30 days but account showing
signs of incipient stress
SMA – 1 Principal or interest payment overdue between 31 – 60 days
SMA – 2 Principal or interest payment overdue between 61 – 90 days

For Free Study Material Subscribe now

Liquidity Management NII = INTEREST EARNED – INTREST PAID
RBI Guidelines: 11 maturity buckets NIM = NII/Earning Assets
Next day
RAROC and Profit Planning
2-7 days
8-14 days Economic Value Added(EVA): It focuses on the
15-31 days creation of value during a particular period in excess
Above 31 days up to 2 months of the required return on capital.
Above 2 m up to 3 months EVA measures the residual economic profit:
Above 3 months up to 6 months EVA=Profit-(Capital x k)
Above 6 months up to 1 year K: Discount Rate
Above 1 year up to 3 years Risk capital or RAROC is part of Risk Adjusted
Above 3 years up to 5 years Performance Meaures (RAPM).
Above 5 years. Risk Capital is calculated as under:
Interest rate risk refers to volatility in Net interest RC = VaR = Volume x volatility x z value *
income (NII) or volatility in NET Interest Margin (NIM), (*at normal distribution)
due to change in interest rates. RAPM=Profit/Risk Capital

For Free Study Material Subscribe now

 CAIIB ABM FORMULAE QUICKSHEET FOR 2023
Arithmetic Mean of Ungrouped or Raw Data Coefficient of Range = (Max – Min)/(Max + Min)
∑𝑛
𝑖=1 𝑥𝑖 QUARTILE DEVIATION AND COEFFICIENT OF
𝑋̅ = ,
𝑛
QUARTILE DEVIATION
Arithmetic Mean of Grouped data 𝑄𝐷 = (𝑄3 − 𝑄1 )/2
∑ 𝑛
𝑓𝑥
𝑋̅ = 𝑖=1Σf 𝑖 𝑖 𝐶𝑜 − 𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝑜𝑓 𝑄𝐷 = (𝑄3 − 𝑄1 )/(𝑄3 + 𝑄1 )
i

Combined Arithmetic Mean Mean Deviation (MD) ungrouped data

𝑛 𝑋̅ +𝑛 𝑋̅ 𝑀𝐷 (𝑀𝑒𝑎𝑛) = ( ∑𝑛𝑖=1|𝑥𝑖 − 𝑥̅ |)/𝑛
𝑋̅ = 1𝑛1 +𝑛2 2
1 2
𝑀𝐷(𝑚𝑒𝑎𝑛)
Coefficient of mean Deviation (mean = 𝑀𝑒𝑎𝑛
Geometric Mean of Ungrouped or Raw Data
𝐺. 𝑀. = 𝑛√𝑥1 𝑥2 … 𝑥𝑛 = (𝑥1 𝑥2 … 𝑥𝑛 )1/4 Mean Deviation (MD) grouped data
𝑀𝐷(𝑀𝑒𝑎𝑛) = (∑𝑛𝑖=1 𝑓1 |𝑥𝑖 − 𝑥̅ |)/(∑𝑛𝑖=1 𝑓𝑖 )
Geometric Mean of Grouped or Raw Data
𝑀𝐷(𝑀𝑒𝑎𝑛)
𝑓1 𝑓2 𝑓𝑛
1
Coefficient of mean Deviation (Mean) =
(𝑥1𝑓1 𝑥2𝑓2 𝑓𝑛 𝑀𝑒𝑎𝑛
𝐺. 𝑀 = 𝑛√𝑥1 𝑥2 … . 𝑥𝑛 = … . 𝑥𝑛 ) 𝑛
Standard Deviation (SD) ungrouped data:
Harmonic Mean of Ungrouped of Raw Data: Σ(𝑥−𝑥̅ )2 Σ𝑥 2
𝑛 𝑆𝐷 = 𝜎√ =√ − (𝑥̅ )2
𝐻. 𝑀. = 1 𝑛 𝑛
∑𝑛
𝑖=1𝑥
𝑖
Standard Deviation (SD) grouped data:
Harmonic Mean of Grouped of Raw Data:
Σ(𝑥−𝑥̅ )2 Σ𝑥 2 Σ𝑓𝑥 2
𝐻. 𝑀. =
𝑛 𝑆𝐷 = 𝜎√ =√ −( )
𝑓𝑖 Σ𝑓 𝑁 𝑁
∑𝑛
𝑖=1𝑥
𝑖
Coefficient of variation =
Median of odd Number of Observations 𝜎
𝑛+1 𝐶𝑉 = 𝑥 × 100%
𝑀𝑒𝑑𝑖𝑎𝑛 = 𝑡ℎ 𝑜𝑏𝑠𝑒𝑟𝑣𝑎𝑡𝑖𝑜𝑛 𝜎
2
𝜎𝑥̅ =
√𝑛
Median of even Number of Observation 1
𝑍 = 𝜎𝑥̅ [𝑥̅ − 𝜇]
𝑛 𝑡ℎ
𝑀𝑒𝑑𝑖𝑎𝑛 = {( 2 ) 𝑜𝑏𝑠𝑒𝑟𝑣𝑎𝑡𝑖𝑜𝑛 +
Standard Error of the mean for infinite populations
𝑛+1 𝑡ℎ 𝜎
( ) 𝑜𝑏𝑠𝑒𝑟𝑣𝑎𝑡𝑖𝑜𝑛)} /2 𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝑒𝑟𝑟𝑜𝑟 𝑜𝑓 𝑡ℎ𝑒 𝑚𝑒𝑎𝑛 =
2 √𝑛

Median of Grouped data: Standard Error of the mean for finite population
𝑁
(𝑙2 −𝑙1 )( −𝑐𝑓) 𝜎 𝑁−𝑛
2
𝑀𝑒𝑑𝑖𝑎𝑛 = 𝑙1 𝜎𝑥̅ = (√ 𝑁−1 )
𝑓 √𝑛

Mode of Grouped data Finite Population Multiplier

(𝑙2 −𝑙1 )(𝑓1−𝑓0 )
𝑀𝑜𝑑𝑒 = 𝑙1 + 𝑁−𝑛
2 𝑓1 −𝑓0− 𝑓2 Finite Population Multiplier = √𝑁−1
RANGE AND COEFFICIENT OF RANGE 𝜎 𝑁−𝑛
(√𝑁−1 )
Range (R) = Maximum – Minimum √𝑛

For Free Study Material Subscribe now

Standard Error of Estimate 𝑃 = (𝐴 𝑈 𝐵 ) = 𝑃 (𝐴 ) + 𝑃 (𝐵 ) − 𝑃 ( 𝐴 ∩ 𝐵 )
Σ(𝑦−𝑦̂)2 Corollary 1 : if the events A and B are mutually
𝑆𝑒 = √ (𝑛−2)
exclusive, then
Σ𝑦 2 −𝑎Σ𝑦−𝑏Σ𝑥𝑦
𝑆𝑒 = √ 𝐴 ∩ 𝐵 = φ ⊏ P (A ∩ B ) = 0 ⇒ 𝑃 (𝐴 ∩ 𝐵 ) = 𝑃 (𝐴 ) +
(𝑛−2)
𝑃 (𝐵 )
Figure 5.3 form and Equation for parabolic curve
Corollary 2: For three non-mutually exclusive events
General equation for a parabolic curve: A, B, C
𝑌 = 𝑎 + 𝑏𝑥 + 𝑐𝑥 2 𝑃(𝐴𝑈 𝐵 ∩ 𝐶 ) = 𝑃 (𝐴) + 𝑃(𝐵) + 𝑃 (𝐶 ) − 𝑃(𝐴 ∩
1. Σ𝑦 = 𝑎𝑛 + 𝑐Σ𝑥 2 𝐵 ) − 𝑃 (𝐵 ∩ 𝐶 ) − 𝑃 (𝐴 ∩ 𝐶 ) + 𝑃 (𝐴 ∩ 𝐵 ∩ 𝐶 )
2. Σ𝑥 2 𝑦 = 𝑎Σ𝑥 2 + 𝑐Σ𝑥 4
𝛴𝑥𝑦
Corollary 3: if A and B are any two events, then
3. 𝑏 = Σ𝑥 2 𝑃 (𝐴 ) = 𝑃 (𝐴 ∩ 𝐵 ) + 𝑃 (𝐴 ∩ 𝐵 𝑐 )
Permutations and combinations Corollary 4: if 𝐴𝐶 is complementary event of A then
𝑛!
𝑃 (𝑛, 𝑟) = "𝑃𝑟 = (𝑛−𝑟)! 𝑃(𝐴𝑐 ) = 1 − 𝑃 (𝐴)
Corollary 5:
Addition Theorem
𝑃(𝐵 ∩ 𝐴𝑐 ) = 𝑃(𝐵) − 𝑃(𝐵 ∩ 𝐴)
Let A and B are two events (subsets of sample space
S) and are not disjoint, then the probability of the Corollary 6 :
occurrence of A or B or A and B both, in other words 𝐼𝑓 𝐴 ⊂ 𝐵 ⇒ 𝑃 (𝐴) ≤ 𝑃(𝐵)
probability of occurrence of at least one of them is Corollary 7: P (Non – occurrence of events) =
given by, 𝑃(𝐴𝑐 ∩ 𝐵𝑐 ) = 1 − 𝑃(𝐴 ∩ 𝐵)

For Free Study Material Subscribe now

Our Success Speaks Louder!

VIKRANT KUMAR SHITANSHU RANJAN

JAIIB, BANK OF INDIA CAIIB, Union Bank

KUNAL SHARMA NAVNEET KUMAR

JAIIB, State Bank of India JAIIB, Punjab National Bank

ALAM ANSARI Shalini

JAIIB, UCO Bank CAIIB, Punjab National Bank

For Free Study Material Subscribe Now

Meet Our Rockstar Faculties
K MURUGAN
Ex-Banker & Trainer JAIIB & CAIIB
(a) Helped 20,000+ Bankers Qualify JAIIB/CAIIB Exams
(b) 38+ years of combined experience as a Professional Banker
& Mentor

PRAVEEN RANA
MBA, JAIIB, CAIIB, NISM, NCFM, CCOC
(a) Helped 10,000+ Bankers Qualify JAIIB/CAIIB Exams
(b) 12+ Years of Experience

PRIYANSHU MAHESHWARI
CA, MBA (Finance), JAIIB
(a) Helped 5000+ Bankers qualify JAIIB/CAIIB Exams
(b) 12+ Years of Experience

SUPRABHA MUDGAL
MBA, JAIIB Qualified, Ex-Bank SO (HR)
(a) Helped 1000+ Bankers Qualify JAIIB/CAIIB Exams
(a) 10+ Years of Experience
(c) Experienced Nodal Officer for IBPS (Recruitment and Selection)

ADV. NIKKITA SINGH

BA LLB, LLM (Gold Medalist)
(a) Helped 2000+ Bankers Qualify JAIIB/CAIIB Exams
(b) 8+ Years of Experience

For Free Study Material Subscribe Now

Meet Our Rockstar Mentors
NIHARIKA WALIA
M.COM, CA-IPCC, UGC NET COMMERCE, B.ED
(a) Helped 1000+ Bankers Qualify JAIIB/CAIIB Exams
(b) 8+ Years of Experience

VISHAL MANTRI
JAIIB & CAIIB Subject Expert, CDCS Trainer, BE, NET/SET
Certified Bank Trainer (IIBF)
(a) Helped 15,000+ Bankers Qualify JAIIB/CAIIB Exams
(b) 10+ Years of Experience

500+ Hours of Live Classes

Experienced Faculties

Based on New Syllabus

Equipped with Mocks & eBooks

CHECK DETAILS

600+ Hours of Live Classes

Experienced Faculties

Based on New Syllabus

Equipped with Mocks & eBooks

CHECK DETAILS

For Free Study Material Subscribe Now