RBI anounces reduction in the risk weight for consumer credit
Updated on November 17, 2023 RBI increases risk weights on consumer credit exposure of banks, and NBFCs to 125% from 100%. Measures announced to contain the risk emanating from a sharp rise in unsecured loans – mostly personal loans and credit cards. It has been also decided to increase the risk weights on Credit Card…
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RAROC approach for risk evaluation
Banks, across the world, use different techniques to evaluate the probable risks through sensitivity analysis, scenario analysis, break-even analysis etc. The most commonly used approach is the Risk Adjusted Return on Capital (RAROC). The banking as well as Non-banking financial institution and also large numbers of businesses are utilizing RAROC metric to calculate Return on…
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RBI relaxes leverage ratio for banks commencing from October 1, 2019
The Reserve Bank Friday (June 28, 2019) relaxed the leverage ratio (LR) for banks from the quarter commencing October 1, 2019. The RBI communiqué said that the decision to relax the leverage ratio for banks is to help them boost their lending capacity. As per RBI notification the leverage ratio stands reduced to 4 per…
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Risks in Foreign Exchange dealings
The business of foreign exchange dealing is confronted with multiple numbers of risks viz. Rate risk, Open Position risk, Maturity Mismatches risk, overtrading risk, Cash Balance Risk, Counterparty risk, Country risk, Fraud Risk, and so on. Nevertheless, like in any other business, risk taking in forex dealing is also inevitable as it also presents possibilities…
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What is CRAR: Capital to Risk Weighted Assets Ratio?
Capital to Risk (Weighted) Assets Ratio (CRAR) is also known as Capital adequacy Ratio, the ratio of a bank’s capital to its risk. The banking regulator tracks a bank’s CAR to ensure that the bank can absorb a reasonable amount of loss and complies with statutory Capital requirements. Higher CRAR indicates a bank is better…
What is Large Exposures Framework (LEF)?
A bank’s exposures to its counterparties may result in a concentration of its assets to a single counterparty or a group of connected counterparties. To address this concentration risk RBI has fixed limits on bank exposures to an individual business concern and to business concerns of a group. As per current guidelines of RBI a…
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