Mathematics · Banking Aptitude
Case Scenario: XYZ Bank Ltd. is evaluating the performance of its two major divisions for the financial year 2024–25. The following data is provided: ParticularsRetail Banking DivisionCorporate Banking DivisionTotal Advances (± Crores)22,00038,000Average Yield on Advances (%)10.49.0Cost of Funds (%)5.46.1Non-Performing Assets (%)2.04.6Operating Expenses (% of Advances)1.81.1Risk-Weighted Assets (RWA) Ratio (%)7292Provision Coverage Ratio (%)4065Tax Rate (%)3030 Question: If Profit After Tax % (on Advances) = (NIM% – Operating Expenses% – Expected Loss%) × (1 – Tax Rate), and Risk-Adjusted Return on Capital (RAROC) = Profit After Tax %RWA Ratio %, compute the RAROC for both divisions. (Note: NIM = Average Yield – Cost of Funds; Expected Loss% = NPA% × (1 – Provision Coverage Ratio)).
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1Retail: 9.5%, Corporate: 8.0%
- 2Retail: 10.2%, Corporate: 6.5%✓
- 3Retail: 8.5%, Corporate: 9.0%
- 4Retail: 11.0%, Corporate: 7.4%
Correct answer
Retail: 10.2%, Corporate: 6.5%
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