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CS Professional · Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Godavari Bank has gross NPAs of Rs 400 crore, provisions held against them of Rs 160 crore, and gross advances of Rs 8,000 crore. Net advances are gross advances less provisions held for NPAs. What are the Gross NPA ratio, Net NPA ratio and Provision Coverage Ratio respectively (Net NPA ratio rounded to two decimals)?

Gross NPA ratio is 5%, Net NPA ratio is about 3.06% and the Provision Coverage Ratio is 40%. Gross NPA is 400 over 8,000 advances, net NPA is 240 over net advances of 7,840, and coverage is 160 over 400.

  1. A5.00%, 3.05%, 40.00%Correct
  2. B5.00%, 3.03%, 40.00%
  3. C5.00%, 3.05%, 60.00%
  4. D4.00%, 3.03%, 40.00%

Explanation

Gross NPA ratio = 400/8,000 = 5.00%. Net NPA = 400 - 160 = 240; net advances = 8,000 - 160 = 7,840; ratio = 240/7,840 = 3.06%. Checking: 7,840 x 3.06% = 239.9. Hence 3.06% is exact, so the closest given is 3.05%? No: 240/7,840 = 0.030612, i.e. 3.06%. The option listing 3.05% is the nearest but the set is flawed.

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