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CS Professional · Banking and Insurance - Laws and Practice · Risk Management in Banks and Basel Accords

Tarang Bank's stress test shows that its Net Stable Funding Ratio is computed with available stable funding of Rs 900 crore and required stable funding of Rs 1,000 crore. Which statement is correct?

NSFR is 90% and the bank falls short of the 100% minimum. The ratio is available stable funding divided by required stable funding, so 900 divided by 1,000 equals 0.90. Since the requirement is at least 100%, the bank has a stable funding deficiency.

  1. ANSFR is 111% and the bank meets the 100% minimum
  2. BNSFR is 90% and the bank falls short of the 100% minimumCorrect
  3. CNSFR is 90% and it is compliant because it exceeds 80%
  4. DNSFR is 10% and the bank meets the minimum

Explanation

NSFR = available stable funding / required stable funding = 900/1000 = 90%. The minimum is 100%, so there is a shortfall of Rs 100 crore of stable funding. The 111% figure inverts the ratio, and no 80% threshold applies.

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