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IMPORTANT CASE STUDIES ON EXPOSURE ON A BORROWER – PART-1 | PRACTISE CAIIB CASE STUDIES FOR CAIIB BFM PAPERS

CAIIB CASE STUDIES FOR CAIIB BFM PAPERS

We hereby are providing the Case studies on the calculation of exposure on a borrower – one of the most important BFM topics & scoring too from the applicable syllabus of BFM Exams 2022. You can also read the CAIIB exam & registration dates of BFM November Attempt 2022 by visit our page.

 

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In this article, you will find 2 case studies on the calculation borrowers exposure. But before you begin with those, we would like to get your attention on the CAIIB study material 2022 prepared especially for upcoming exams of CAIIB 2022.

important topic->Caiib classes schedule for nov exams 2022

Here are the highlights of the CAIIB BFM Study Material 2022:

 

  • BFM Video lectures 2022 
  • Covering Conceptual aspects (We also have question videos of BFM)
  • Case studies of BFM concepts properly explained
  • Mock tests 2022 of BFM which can also be reviewed 
  • BFM study Notes 2022 in soft form (epdfs)
  • Material Accessibility through mobile + desktops
  • Covers BFM latest Syllabus applicable for November 2022 Exams

To access the material you can either:

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You can also Direct Message us with your name & Course to know more about the course at this Number: 8360944207

BFM CASE STUDIES ON COMPUTATION OF EXPOSURE ON A BORROWER FOR CAIIB EXAM 2022

 

COMPUTATION OF EXPOSURE ON A BORROWER – BFM CASE STUDY 1:

 

No. Credit facility Amount Sanctioned Amount Outstanding Credit — 1 conversion factor for non-fund facilities
1 Cash Rs. 500  Rs. 300 
2 Bills Rs. 100  Rs. 50 
3 Export loans Rs. 200  Rs. 100 
4 Term loans Rs. 300  Rs. 100 
5 Financial guarantees Rs. 100  Rs. 80  100%
6 Performance guarantees Rs. 100  Rs. 100  50%
7 Standby Letter of Credit Rs. 100  Rs. 50  100%
8 Documentary Letter of Credit Rs. 400  Rs. 300  20%
9 Unconditional take out finance Rs. 100  Rs. 100  100%
10 Conditional take out finance Rs. 100  Rs. 100  50%
11 Total Rs. 2000  Rs. 1280 

 

Balance amount of Rs. 200 of term loan is to be withdrawn as under: 

Within 1 year = Rs. 100 and 

After 1 year = Rs. 100. 

In case of un-drawn portion, the exposure is to be calculated as under:

Cash credit = 20%; 

Term Loan to be withdrawn within 1 year = 20%; 

Term Loan to be withdrawn after 1 year = 50%

 

Q-01 Calculate the exposure for undrawn amount of fund based limits other than term loans.

  • Rs. 20 
  • Rs. 50
  • Rs. 70 
  • Rs. 140

 

Q-02 Calculate the exposure for undrawn amount of term loans.

  • Rs. 20 
  • Rs. 50
  • Rs. 70 
  • Rs. 140

 

Q-03 Which of the below amount of exposure for undrawn amount for fund based limit does not match? 

  • Cash credit, bills and export loans 70
  • Term loan to be withdrawn in one year 20
  • Term loan to be withdrawn after one year 20
  • Total amount for non-withdrawn amount 140

 

Q-04 Calculate the credit equivalent of non-fund based exposure in respect of letter of credit:

  • Rs. 130 
  • Rs. 110
  • Rs. 150 
  • Rs. 390

 

Q-05 Calculate the the credit equivalent of non-fund based exposure of bank guarantees:

  • Rs. 130 
  • Rs. 110
  • Rs. 150 
  • Rs. 390

 

Q-06 Calculate the credit equivalent of non-fund based exposure in respect of take out finance:

  • Rs. 130 
  • Rs. 110
  • Rs. 150 
  • Rs. 390

 

Q-07 Calculate the credit equivalent of total non-fund based exposure

  • Rs. 130 
  • Rs. 110
  • Rs. 150 
  • Rs. 390

 

Q-08 Calculate the total exposure on account of the borrower:

  • Rs. 2000 
  • Rs. 1280
  • Rs. 1080 
  • Rs. 900

 

Answers of computation of exposure on a borrower – BFM

1-III 

2-III 

3-III 

4-II 

5-I 

6-III 

7-IV 

8-III

 

Explanation of Answers of BFM Case study 1:

 

  1. Calculation of Undrawn amount under fund based limits-other than term loan:

Amount = Rs. 800 – 450 = Rs. 350 at 20% = Rs. 70

 

  1. Calculation of Exposure for undrawn amount of term loan as per RBI guidelines = 

within 1 year = Rs. 100 @ 20% = Rs. 20 and 

after 1 year = Rs. 100 @ 50% = Rs. 50. 

Total = Rs. 20 + 50 = Rs. 70.

 

  1. Calculation of Undrawn amount under fund based limits other than term loan

Amount = Rs. 800 – 450 = Rs. 350 at 20% = Rs. 70

 

Within 1 year = Rs. 100 @ 20% = Rs. 20 and 

After 1 year = Rs. 100 @ 50% = Rs. 50. 

Total = Rs. 20 + 50 = Rs. 70.

Exposure for non-withdrawn amount = Rs. 70 + Rs. 20 + Rs. 50 = Rs. 140.

 

  1. Letter of credit standby = Rs. 50 x 100% = Rs. 50.

Documentary LC = Rs. 300 x 20% = Rs. 60. 

Total = 50 + 60 = Rs. 110.

 

  1. Bank guarantees:

Financial guarantee = Rs. 80 x 100% = Rs. 80,

Performance guarantee = Rs. 100 x 50% = Rs. 50. 

Total = Rs. 80 + Rs. 50 = Rs. 130.

 

  1. Take out financing for unconditional = Rs. 100 x 100% = Rs. 100.

For conditional 100 x 50% = Rs. 50

Total = Rs. 100 + Rs. 50 = Rs. 150.

 

  1. Letter of credit = Rs. 50 x 100% = Rs. 50, Rs. 300 x 20% = Rs. 60, 

Total = Rs. 50 + Rs. 60 = Rs. 110.

 

Bank guarantees = Rs. 80 x 100% = Rs. 80, Rs. 100 x 50% = Rs. 50, 

Total = Rs. 80 + Rs. 50 = Rs. 130. 

Take out financing = Rs. 100 x 100% = Rs. 100, Rs. 100 x 50% = Rs. 50, 

Total = Rs. 100 + Rs. 50 = Rs. 150. 

Total = Rs. 390

 

  1. FB Based drawn = Rs. 550, 

Add: FB undrawn = Rs. 140, 

Add: Non-fund based = Rs. 390, 

Total = 1080

 

COMPUTATION OF EXPOSURE ON A BORROWER – BFM CASE STUDY 2:

A company – Jadoogar Ltd. has raised a loan of Rs. 100 crore and collateral against the loan is a bank term deposit of Rs. 40 crore. 

 

You are to calculate the net exposure which qualifies for capital adequacy purpose, in case there is no maturity mismatch.

 

  1. a) Rs. 100.00 Crore
  2. b) Rs. 60.00 Crore
  3. c) Rs. 40.00 Crore 
  4. d) Information is Inadequate

 

Answers of computation of exposure on a borrower – BFM

 

The net exposure = Rs. 100 crore – Rs. 40 crore = Rs. 60 crore. 

Because the haircut for – collateral of bank deposit = 0 as per RBI guidelines. Therefore, the full Value of Rs. 40 crore would be deducted from the exposure, without any haircut.

 

You can also find the BFM case studies on calculation of Exposure on Borrower/Loans by visiting our official site. We will soon be publishing the next set of case studies on computation of exposure on a borrower soon. Till then practice this one & solve it by hand.

 

All the best for CAIIB Exams!

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