CHAPTER-1

Overview of banking , functions & roles and

banking regulations
HISTORY OF BANKING
 Greece & Rome : Temple used to make loan…
Innovation of accepting deposits & Exchange of
currency

 China & India : Also were involved in business of

money lending

 Word ‘bank’ comes from Italian word ‘BANCO’ or

‘bench’
HISTORY OF INDIAN BANKING SECTOR
 The indigenous bankers of India
 Called Shroffs, Seths, Sahukars, Mahajans etc..
 First bank of India
 Considered to be bank of Hindustan established in 1770
 Three presidency banks
 Bank of Calcutta(1806), bank of Bombay(1840) and bank of Madras(1843)
 Creation of Imperial bank of India
 In 1921, Bank of Calcutta, bank of Bombay and bank of Madras was
amalgamated to create Imperial bank of India
 Rise of State bank of India
 In 1955, the Imperial bank of India was nationalized and named as State
bank of India.
HISTORY OF INDIAN BANKING SECTOR
 Creation of RBI:
 Reserve Bank of India was established via the RBI Act of
1934 as the banker to the central government. 
 Nationalization of banks:
 In1969, GoI nationalized 14 banks in order to gain control
over banking operations in India.
 Primary purpose was to channelize the fund towards sections such as
agriculture , small industries, export etc.
 Then the GoI (Indira Gandhi) believed that, the best way to achieve

these objectives was through nationalization of these banks.

 In 1980, nationalization of six more banks happened.
WHAT IS BANK?

Let’s do a role play!!!

WHAT IS BANK…?

Receives
Deposit Money
from
depositors
Trust Lend Money
to Borrowers

Balance sheet of bank

Liabilities Assets
Deposit received from Depositors Loans provided to Borrowers
 What is business model?

What is business model of a

bank?

Is there any problem with

business model of a bank?
WHAT IS BANK…..?
 As per banking Regulation Act, 1949

 Section 5(b) ‘banking’ means the accepting, for the

purpose of lending or investment, of deposits of money
from the public, repayable on demand or otherwise, and
withdrawal by cheque, draft, order or otherwise;
 Section 5(c) “banking company” means any company
which transacts the business of banking in India.
DECODING THE DEFINITION OF BANK
Awesome Ltd. - a manufacturing company- accepts the
deposit from public for its’ business requirement
purpose.

Can Awesome Ltd. be called

bank?

NO

Acceptance of the deposits should be for the purpose

of lending and investment.
DECODING THE DEFINITION OF BANK

Jupiter credit society accepts the deposit from its’ 153

members only for the purpose of lending.

Jupiter credit society be called

bank?

NO

The deposits should be accepted from public. So

‘Nidhis’, multi benefit societies, co-operative societies
etc. that accept deposit from their members only are not
banks.
WHAT IS BANK…..?
Decoding the definition of bank:
 As bank obtain million of deposit from public and
public does not have any control over the bank
management…GoI has to safeguard the money of
depositors.
 Only firm or company are permitted to start bank not an
individual.
 Money lenders are not allowed to be considered as banks
as they do not take deposits from public.
IMPORTANCE OF BANKING IN THE
ECONOMY
IMPORTANCE OF BANKING IN THE
ECONOMY
  Removing the deficiency of capital formation
 Provision of finance and credit

 Important role of intermediary

 Extension of the size of the market

 Act as an engine of balanced regional development

  Financing agriculture and allied activities

 THE INDIAN FINANCIAL
INSTITUTIONAL STRUCTURE
INDIAN FINANCIAL INSTITUTIONS

Banks Non banks

Commercial banks (including Niche banks - Payment banks, Developm Insurance Non banking Mutual Others (Pension
Funds, Primary
regional rural banks) Cooperative banks Small Finance banks ent banks companies
finance companies
(NBFC) Funds Dealers)
THE COMMERCIAL BANKING SYSTEM IN INDIA

Foreign Regional
rural banks
banks (RRBs)

Private Commercial
Sector banks banks

Public
sector banks
DEVELOPMENT BANKS & FINANCIAL
INSTITUTIONS
 National Bank for Agriculture and Rural Development
(NABARD)
 Export Import bank of India (EXIM bank)

 National Housing Bank (NHB)

 Small Industries development Bank of India (SIDBI)

 Industrial Development Bank of India (IDBI)

OWNERSHIP OF PSBS

State Bank of India Regulated by the State Bank of India Act,

(SBI) 1955

Regulated by State Bank of India

Subsidiaries of SBI (Subsidiary Banks) Act, 1959

Banking companies (Acquisition and

Nationalized banks Transfer of Undertakings) Act, 1970 and
1980

 Central government is mandated to hold a minimum shareholding of 51% in

nationalized banks and 55 per cent in SBI. In turn, SBI will have to hold a
minimum 51% of the shareholding in its subsidiaries.
 Foreign investment cannot exceed 20% of the total paid up capital of public
sector banks.
 PRIVATE SECTOR BANKS
 New private sector banks can initially enter the market with a
capital of Rs. 5 billion
 Guidelines permit business/industrial houses to promote banks,
conversion of NBFCs into banks and setting up of new banks in
the private sector by entities in the public sector, through a Non-
Operative Financial Holding Company (NOHFC) structure.
 In August 2016, RBI permitted licencing of new private banks to
float universal banks –eg, IDFC and Bandhan
 The Universal bank has to get its shares listed on stock
exchanges within six years from commencement of business.
 SMALL FINANCE BANKS

 Small Finance Banks give a fillip to financial inclusion by

(a) providing savings vehicles,
(b) supplying credit to small business units, small and marginal farmers,
micro and small industries and other unorganized sector entities, through
high technology, low cost operations.
Small finance banks can be established by
(a) individuals/ professionals with 10 years’ experience in the banking and
finance industry,
(b) companies / societies owned and controlled by residents,
(c) existing Non Banking Finance Companies (NBFC), Micro finance
institutions (MFI) and Local Area Banks (LAB) owned and controlled by
residents
SMALL FINANCE BANKS
 The minimum paid up equity capital required is Rs 1
billion. Promoters’ minimum initial contribution should
be 40%. (Recently, RBI has proposed minimum paid up
equity capital of Rs 2 billion)
 SFB would be required to follow all prudential norms
and regulations applicable to commercial banks
 SMALL FINANCE BANKS

Some of Small finance banks have been granted licences such as…
 AU Small Finance Bank

 Equitas Small Finance Bank

 Ujjivan Small Finance Bank
 Utkarsh Small finance Bank
 Janalakshmi Small Finance Bank
 Capital Lab Small Finance Bank
 Disha Small finance Bank
 ESAF Small finance Bank
 RGVN Small finance Bank
 Suryoday Small Finance Bank
PAYMENTS BANKS
 Payment Banks are essentially ‘narrow banks’.

 To safeguard deposits placed with it, a narrow bank does

not undertake lending activities.

 Rather, it invests the majority of its deposits in ‘safe’

instruments such as government securities
 PAYMENTS BANKS
 Payments banks are intended to provide
(a) small savings accounts and
(b) payments/ remittance services to migrant labour workforce, low
income households, small businesses, unorganized sector entities and
other users
 The minimum paid up equity capital for setting up Payments
banks is Rs. 1 billion. The promoters of these banks should
contribute at least 40% of the equity capital and hold their stake
for the first five years after the banks commence business.
Foreign shareholding in Payments Banks is permitted.
 Payments banks have to provide at least 25% of physical access
points in rural centres.
 WHAT CAN PAYMENTS BANKS DO?
 Accept demand deposits - maximum balance of Rs. 100,000
per customer.
 Issue ATM/debit card, but not credit cards.

 Technology driven Payments and remittance services

through various channels, specifically mobile devices, and
issue debit / ATM cards usable on ATM networks of all
banks.
 Function as a Business Correspondent of another
commercial bank
 Distribute non-risk sharing simple financial products like
mutual fund units and insurance products.
 WHAT PAYMENTS BANKS CANNOT DO

 Payments banks cannot use the funds sourced for lending

 Funds would have to be deployed as follows:
 As CRR with RBI
 Minimum of 75% of demand deposit balances as SLR, in eligible
government securities or treasury bills with maturity up to one year
 Maximum of 25% of demand deposit should be held in current and
time / fixed deposits with other commercial banks for operations and
liquidity management
PAYMENTS BANKS
1) Aditya Birla Idea Payments Bank
2) Airtel Payments Bank
3) India Post Payments Bank, Department of Posts
4) FINO Payments Bank, FINO PayTech Limited 5)
National Securities Depository Limited Payments Bank
6) Jio Payments Bank, Reliance Industries Limited
7) Paytm Payments Bank
8) Vodafone M-Pesa Payments Bank
 FOREIGN BANKS
 In the first phase, foreign banks already operating in India were
allowed to convert their existing branches to WOS (Wholly owned
subsidiaries).
  In the second phase from April 2009, only the WOS route is
permitted for a foreign bank to operate in India. Once established,
the regulation is non-discriminatory in India, as foreign banks enjoy
near national treatment in the matter of conduct of business.
 FOREIGN BANKS
 Local incorporation of foreign banks as WOS is advantageous
because:
 Enables creation of separate legal entities that have their own capital base
and local Board of directors;
 There is a clear distinction between the assets and liabilities of the foreign
banks operating in India and those of their foreign parent banks;
 Local regulation and law enforcement is possible for better control

  The initial minimum paid up capital for setting up the WOS is Rs. 5
billion
ENTRY OF FOREIGN BANKS IN INDIA : CHANGING DYNAMICS

 2005: First roadmap for foreign banks in India

announced by RBI
 Bringing global innovation standards to banking practice
in India
 The financial crisis of 2008 and impact on foreign banks

 Increased level of competition

 More customer-centric approach

DIFFERENCE BETWEEN COMMERCIAL BANKS & CO-
OPERATIVE BANKS
BANKING : THE GLOBAL SCENARIO,2019
CONCEPT OF UNIVERSAL BANKING
 Universal Banking is a superstore for financial products.
 Universal banking combines the services of a commercial
bank and an investment bank, providing all services from within
one entity.
 Universal banking is a banking system in which banks provide
a wide variety of financial services, including commercial and
investment services. 

 Universal banks may offer credit, loans, deposits, asset

management, investment advisory, payment processing, securities
transactions, underwriting and financial analysis. It provides all
types of deposit products and all types of loan products.
PREVALENT BANKING MODELS
●
Intermediaries between security issuers and investors
to help firms raise capital
●
Provide financial consultancy services, equity research
●
Provide various financial services _ M&A, leveraged
finance, restructuring, risk management, underwriting,
securities trading, asset management, etc.
●
Main Income source: Commissions and fees

Investment Banks

●
Main functions - deposit taking, making loans - Asset
Transformers
●
Clientele - private, corporate, government, sovereigns
●
Other services - credit cards, payments and settlements,
private banking, custodial services, providing guarantees
and trade financing
●
Main Income sources: Interest from loans and investments,
commissions and fees from other services

Commercial Banks
Regulatory framework
for
banks
REGULATIONS FOR BANKS
Legal Framework
 RBI Act, 1934
 Banking Regulation Act, 1949
 State Bank of India (SBI) Act, 1955, SBI
(Subsidiary Banks) Act, 1959 and Banking
Companies (Acquisition and Transfer of
Undertakings) Act 1970/1980.
 SALIENT FEATURES OF THE
REGULATORY NORMS
 Licensing of Banks
 Opening of New Private Sector and Foreign Banks

 Minimum paid-up capital and reserves

 Cash Reserve and Liquidity Reserve Requirement

 Priority Sector Advances

 Interest Rates

 Connected Lending

 Prudential Norms – Capital Adequacy, IRAC(Income

Recognition and Asset Classification) norms, Classification and
Valuation of Investments, Disclosure Standards, Exposure
norms, etc.
CREATION OF RBI
RBI IS CONSTITUTED UNDER RESERVE BANK OF INDIA ACT, 1934 AND STARTED
FUNCTIONING WITH EFFECT FROM 1ST/APRIL/1935

Main
objectives
of RBI
Public debt
management &
banker of GoI

Regulation To manage the

of banking monetary and
sector credit system

proper arrangement To stabilizes

of agricultural, internal and
industrial finance external value of
etc. rupee
development
of organized
money market
RBI’S RESERVE REQUIREMENTS
 All banks in India are required to maintain a
specified amount of reserves as cash / bank
balances with the RBI and as investment in
approved securities.
 All such reserves that are to be maintained as a
legal requirement are termed ‘Primary
Reserves’.
 These reserve requirements are categorized as
[a] Cash Reserve Ratio [CRR] and [b] Statutory
Liquidity Ratio [SLR]
THE CRR AND SLR
 CRR (Cash Reserve Ratio) is the ‘FRACTIONAL
RESERVE’ and is maintained as cash balances with RBI
 Current CRR rate is 3%
 The SLR(Statutory Liquidity Ratio) is maintained to
 Facilitate
government borrowings through bank investment in
approved securities
 Provide additional liquidity to banking system
 Current SLR rate is 18.5%
 Developmental financial institutions not required to
maintain reserves
 All rates and ratios can be checked at https://
www.rbi.org.in/home.aspx
MAINTENANCE OF RESERVE
REQUIREMENTS
 CRR and SLR are prescribed as a minimum percentage
of “Net Demand and Time Liabilities” [NDTL] of each
bank operating in India
 Conceptually, NDTL is the aggregate of liabilities to
others and net inter bank liabilities [NIBL], where Net
Inter bank liabilities = liabilities of the banking system
LESS assets with the banking system.
 NDTL is measured on every alternate Friday by banks –
these Fridays are termed ‘Reporting Fridays’.
 Maintenance of CRR and SLR are computed based on
the NDTL as on the Reporting Friday.
 There are penal provisions for non compliance with the
reserve requirements
 NET DEMAND AND TIME LIABILITIES
Net Time Liabilities Demand Liabilities

Can be with public, other banks, entities etc.

Includes;
Includes;
current deposits, demand
fixed deposits
liabilities portion of savings
cash certificates cumulative
bank deposits, margins held
After and recurring deposits
against LC/guarantees, balances
deducting time liabilities portion of
in overdue fixed deposits, cash
assets with savings bank deposits
certificates and
other staff security deposits
cumulative/recurring deposits,
banks margin against LC
outstanding Telegraphic
Gold deposits
Transfers , Mail Transfers,
deposits held as securities for
Demand Drafts, unclaimed
advances etc.
deposits etc.
 SCHEDULED BANKS
 Definition:
“All banks which are included in the Second Schedule to the Reserve Bank of
India Act, 1934 are Scheduled Banks. These banks comprise Scheduled
Commercial Banks and Scheduled Co-operative Banks.”
 Source : RBI https://www.rbi.org.in/scripts/PublicationsView.aspx?id=14655

 Reserve Bank of India in turn includes only those banks in this schedule which
satisfy the criteria mentioned on section 42 (6) (a) of the Reserve Bank of India
Act 1934.
 Criteria for a Scheduled Banks:
  Scheduled Banks has to fulfill minimum paid up capital and reserve requirement
  These bank have to submit details of their activities to the Reserve Bank of India
every week.
 Official list of all banks in India by RBI:
 https://rbi.org.in/commonman/english/scripts/banksinindia.aspx
SCHEDULED COMMERCIAL BANKS

Ministry of Finance

RBI

SBI and associates Nationalized banks (Public sector banks) Private sector banks Foreign Banks Regional rural banks (RRBs)
Scheduled Commercial banks
PROBING QUESTIONS

WHY BANKING IS ONE OF THE

MOST REGULATED INDUSTIRES
GLOBALLY?

WHY REGULATE BANK

CAPITAL?
JUSTIFIED ANSWERS

Need of stringent regulation

The risk of systemic crisis

&
Inability of depositors to monitor banks

Need of stringent regulated capital

Capital reduces risk of failure by providing

protection against unexpected losses.
ECONOMIC CAPITAL
 Economic capital can be defined as the amount of capital
considered necessary by banks to absorb potential losses
associated with banking risks.

 It is a capital estimated to cover the probabilistic

assessment of potential future losses.
 Bank’s share holders look to economic capital to gauge
the capability of bank to meet potential losses.
 REGULATORY CAPITAL
 Regulatory capital depends on ‘confidence level’ set by regulator.
 As defined by prevailing regulation related to capital. It is sort of
an assurance to depositors that bank has kept enough capital to
meet demand by depositors.

 Regulatory capital is concerned with banks’ financial staying

power. In the long run, stability of banks depends on capital to
support economic/banking risks.
 Depositors look to adequacy of regulatory capital.
 REGULATORY CAPITAL- RISK BASED
CAPITAL STANDARDS
 In 1980s, concerns about bank safety increased
 Bank for International Settlements [BIS], the world’s
oldest international financial organization, established
the Basle Committee for Financial Supervision
[BCBS]
 BCBS introduced bank capital measurement system
popularly known as Basle Capital Accord
BANK FOR INTERNATIONAL
SETTLEMENTS [BIS]
 Objectives:
 Fostering international and monetary co-operation
 Acting as bank for central banks
 60 central banks [incl. RBI] have voting rights in the BIS

 BIS does not accept deposits from or make advances to

governments or other borrowers
 THE BASEL COMMITTEE FOR BANKING
SUPERVISION
 BCBS – an important activity of BIS –since 1974
 Objective – To tighten supervision of international banks
to achieve greater financial stability
 Located in Basel, Switzerland

 Committee encourages common approaches and common

standards for banking – no legal or supervisory authority
 CAPITAL ADEQUACY RATIO- IN A SIMPLE WAY

Equity capital +
equity like capital

Regulatory capital

Risk weighted assets

Summation of Risk
weight assigned to
every asset
multiplied by value
of every asset +
contingent liabilities
BASLE ACCORD-I
 1988 – ‘internationally active banks’ in G10 countries
agreed that bank capital should be at least 8% of assets
measured according to risk profile
 Tier –I capital = shareholders’ equity + retained earnings

 Tier –II capital = additional internal & external sources

available to bank.
 Portfolio approach to risk – assets can have 0, 10, 20, 50,
100% risk weight
 Accord adopted as a world standard in 1990s – more than
100 countries
BASLE ACCORD I - DRAWBACKS
 One shoe fits all approach
 The regulatory measures were seen to be in
conflict with increasingly sophisticated internal
measures of economic capital
 The simple bucket approach with a flat 8%
charge for claims on the private sector has
resulted in banks moving high quality assets off
their balance sheets, thus reducing the average
asset quality
 The Accord did not sufficiently recognize credit
risk mitigation techniques
BASLE-II ACCORD
 Revised framework - a spectrum of approaches ranging
from simple to advanced for measurement of credit risks,
market risks and operational risks, all of which could
lead to asset quality and value deterioration.
 The framework also builds in incentives for better and
more accurate risk management by individual banks.
BASLE-II – THE THREE PILLARS
 Three mutually reinforcing ‘pillars’, which together are
expected to contribute to the safety and soundness of the
international financial system
 First Pillar: Minimum Capital requirement

 Second Pillar: Supervisory Review

 Third Pillar: Market discipline and enhanced disclosures

MINIMUM CAPITAL
REQUIREMENTS
 Capitalrequired to compensate for credit risk,
market risk & operational risk

 Capital ratio – regulatory capital to risk weighted

assets [credit risk+ market risk+ operational risk]
 Capital ratio not to be less than 8%
RISK
 Credit risk : Possibility of loss due to failure of a
borrower to repay a loan or uphold the contractual
obligations.
 Operational risk: Possibility of loss resulting from
inadequate or failed internal processes, people and
systems or from external events, generally includes
legal risk.
 Market risk: When there is possibility of a loss due to
change in volatility, interest rates, liquidity conditions,
credit quality etc. 
BASLE-II : PILLAR I – MINIMUM CAPITAL
REQUIREMENTS
Capital for Credit risk:
 A] Standardized approach
 B] Internal Ratings Based [IRB] –foundation and advanced
 C] Securitization framework

Capital for Market Risk:

 A] Standardized approach [ maturity method]
 B] Standardized approach [duration method]
 C] Internal models method

Capital for operational risk

 A] Basic indicator approach
 B] Standardized approach
 C] Advanced Measurement Approach [AMA]
BASEL II
 Some common rules to provide a level playing field for banks framed by
Basel committee;
 Objectives of the new accord:
 - Promotion of safety and soundness of the financial system.
 - Enhancement of competitive equality
 - Constitution of a more comprehensive approach to addressing risks

 All banks implemented Basel-II with effect from March 2007

 Banks to initially adopt standardized approach for credit risk and basic
indicator approach for operational risk
CRITICISM OF BASEL-II : POST 2008
FINANCIAL CRISIS

 Basel-II failed to promote frameworks for accurate and realistic

measurement of risk.
 Complex derivative products’ risks not adequately recognized or addressed
 Excessive leverage – liquidity risk- solvency risk relationship not
addressed
 Focus on individual banks – contagion effects ignored

 Pro-cyclical approach:
 In good times, when banks are doing well, and the market is willing to
invest additional capital in banks, Basel II does not demand more capital
from banks.
 However, in bad times, when markets run out of or are unwilling to supply
additional capital, Basel II requires that banks bring in more capital to
support stressed assets.
 BASEL-III
 Basel-III is a comprehensive set of reform measures to strengthen the regulation,
supervision and risk management of the banking sector. These measures aim to:
 Improve the banking sector’s ability to absorb shocks arising from financial and
economic stress, whatever the source
 Improve risk management and governance
 Strengthen banks’ transparency and disclosure
 The reforms target at:
 Bank-level, or micro prudential, regulation, which will help raise the resilience of
individual banking institutions to periods of stress.
 Macro prudential, system wide risks that can build up across the banking sector as well
as the pro-cyclical amplification of these risks over time.
 The Reserve Bank issued Guidelines based on the Basel III reforms on capital
regulation on May 2,2012 which have been implemented from April 1, 2013 in India in
phases and it is fully implemented as on March 31, 2018
TIMELINE OF BASEL III

Source: https://www.bis.org/bcbs/basel3.htm
 BASEL-III

PILLAR 1 PILLAR 2
PILLAR 3
Minimum capital Supervisory review process
requirements- enhanced - enhanced in Basel III
Disclosure and Market
minimum capital and over Basel II for firm wide
discipline - enhanced in
liquidity requirements as risk management and
Basel III over Basel II
compared with Basel II capital planning
BASEL-III OBJECTIVES
 To strengthen global capital and liquidity regulations.
The goal is to promote a more resilient banking sector
 To improve the banking sector’s ability to absorb shocks
arising from financial and economic stress
 BASEL-III REFORMS

CAPITAL AND LIQUIDITY SYSTEMIC RISK

Quality, consistency and Liquidity coverage ratio -
transparency of bank capital, Capital of Systematically important banks and their
short term liquidity (LCR),
capital buffers, controlling
Net stable funding ratio
monitoring, counterparty credit risk measures
and monitoring leverage strengthened, contingent capital measures
(NSFR) - long term liquidity
 DIFFERENCES BETWEEN BASEL-II AND
BASEL-III
 Additional buffers introduced in Basel-III
 Capital conservation buffer
 Countercyclical buffer
 Additional capital for systematically important financial
institutions (SIFI)
 Ratios introduced in Basel-III
 Leverage ratio
 Liquidity ratios – short term and long term liquidity
BASEL II AND III CAPITAL COMPARED

    Capital as % of risk weighted assets

Basel II Basel III (as on Jan 1,

2019)
A (=B+D) Minimum total capital 8.0 8.0

B Minimum tier 1 capital 4.0 6.0

C Of which, Minimum 2.0 4.5

Common Equity (tier 1
capital) (CET1)
D Maximum tier 2 capital 4.0 2.0
(within total capital)
E Capital Conservation nil 2.5
Buffer (CCB)
F (=C+E) Minimum Common equity 2.0 7.0
tier 1 capital + CCB
G (=A+E) Minimum total capital + 8.0 10.5
CCB
INDIA – BASEL III IMPLEMENTATION
 From April 1, 2013
 In phases upto March 31, 2018

 Capital required will be 9% of RWA against 8% by

BCBS
 Capital requirement in India as per RBI
    Capital as % of risk weighted assets
Basel II Basel III (BCBS) Basel II –BANKS Basel III –
(BCBS) (as on Jan 1, IN INDIA – BANKS IN
2019) Existing INDIA- required
at end of March
2018

A (=B+D) Minimum total capital 8.0 8.0 9.0 9.0

B Minimum tier 1 capital 4.0 6.0 6.0 7.0

C Of which, Minimum Common 2.0 4.5 3.6 5.5
Equity (tier 1 capital) (CET1)

D Maximum tier 2 capital (within 4.0 2.0 3.0 2.0

total capital)
E Capital Conservation Buffer nil 2.5 nil 2.5
(CCB)
F (=C+E) Minimum Common equity tier 2.0 7.0 3.6 8.0
1 capital + CCB
G (=A+E) Minimum total capital + CCB 8.0 10.5 9.0 11.5

H Leverage ratio (tier 1 capital / nil 3.0% nil 4.5%

total exposure)