CMA Final · Risk Management in Banking and Insurance · Credit Risk Management
A bank holds a corporate exposure of ₹50 crore that carries a risk weight of 150% under the standardised approach. If the bank must maintain total capital of 9% of risk-weighted assets, the minimum capital required against this exposure is:
The risk-weighted asset is ₹50 crore times 150%, which is ₹75 crore. Applying the 9% capital requirement gives ₹6.75 crore. Computing capital on the unweighted exposure would give ₹4.50 crore, which is wrong because it ignores the risk weight.
- A₹4.50 crore
- B₹6.75 croreCorrect
- C₹7.50 crore
- D₹3.00 crore
Explanation
RWA = 50 × 150% = ₹75 crore. Capital = 9% × 75 = ₹6.75 crore. Using the unweighted 50 crore gives ₹4.50 crore, which ignores the risk weight.
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