New One Goal, Three Exams: Strategies for Mastering RBI, SEBI, and IFSCA Exams
Register

Question

Which of the following metric of the bank is dependent on the movements of the interest rate?

A NIM Correct Answer Incorrect Answer
B NPA Correct Answer Incorrect Answer
C PCR Correct Answer Incorrect Answer
D Net Profit Correct Answer Incorrect Answer
E CASA Correct Answer Incorrect Answer

Solution

The management of Interest Rate Risk should be one of the critical components of market risk management in banks. The Net Interest Income (NII) or Net Interest Margin (NIM) of banks is dependent on the movements of interest rates. Any mismatches in the cash flows (fixed assets or liabilities) or repricing dates (floating assets or liabilities), expose banks’ NII or NIM to variations. The earning of assets and the cost of liabilities are now closely related to market interest rate volatility

Practice Next

Relevant for Exams:

×
×