Mathematics · Risk-Adjusted Return on Capital
Given the following parameters for a credit facility: Sanctioned Limit = ₹6.0 cr; Average Utilization = ₹5.0 cr; Lending Rate = 11%; Cost of Funds = 6%; Processing/Commitment Fee = 0.20% on the sanctioned limit; Expected Loss (EL) = ₹3.0 lakh; Operating Expenses (Opex) = ₹2.0 lakh; and Economic Capital = 12% of Exposure at Default (EAD = ₹6.0 cr). Calculate the Risk-Adjusted Return on Capital (RAROC).
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