BFM Formula

Comp mponent sofCapi t al  T t alf undswoul di nc l udet hecomponent sTi erIcapi t alandTi erI I Capi talf unds : hecapi capi t al .

El em me ent sofTi erICapi t al : heel  T ement sofTi erIcapi t ali ncl udes: ( i ) Pai dup capi t al ( ordi nary shares) , st at ut ory r eserves, and ot her di scl osed f r ee r e s er v es ,i fany ; ( i i )Pe r pe t ualNo nc umul at i v ePr e f e r e nc eShar e s( PNCPS)e l i g i bl ef o ri nc l us i o n asTi e rI c api t al-s ubj e c tt ol a ws wsi nf o r c ef r om t i met ot i me ; ( i i i )I nno vat i v ePe r pe t ualDe btI ns t r ume nt s( I PDI )e l i g i bl ef ori nc l us i on asTi e rIc api t al ; and ( i v )Capi t alr e s er v e sr e pr e s e nt i ngsur pl usar i s i ngouto fs al epr o c e edsofas s e t s .

El eme ment sofTi erI ICapi t al :Theel e me me nt sofTi e rI Ic api t ali nc l ude Undi s c l o se dr e s e r v e s ,r e v al uat i o nr e s e r v e s ,g e ne r alpr o v i s i o nsandl o s sr e s e r v e s ,hy br i d capi t ali nst r ument s,subor di nat eddebtandi nves t mentr eser veaccount .

( a)Undi scl osedReserves  The ycan bei ncl udedi n capi t al ,i ft he yr epr ese ntaccumul at i onsofpos t t axpr ofit sand ar e not e ncumb mber ed by any known l i abi l i t y and shoul d not be r out i nel y use df or absorbi ngnorma mall ossoroper at i ngl osses.

( b)Reval uat i onReserves scountof55percent  I twoul dbeprudentt oconsi derr eval uat i on r eservesatadi whi l e de t e r mi mi ni ngt he i rv al uef ori nc l us i oni nTi e rI Ic api t al .

( c)GeneralPr ovi si onsandLossReserves mum of1. 25 per centof Gener alpr ovi si ons/l ossr eserveswi l lbeadmi t t edupt oamaxi t ot alri skwei ght ed assets,  w  whi c he v e ri sl ower ,i st aken Ex c e sspr o v i s i o nswh whi c har i s eons al eofNP Aswo ul dbee l i g i bl eTi e rI Ic api t als ubj e c tt o t heo v er a l lc e i l i ngof1. 25% oft o t alRi s kWe i g ht e dAs s e t s .

e)Subor di nat edDe Debt

Bankscan r ai se,wi t ht heappr ovaloft hei rBoar ds,r upeesubor di nat eddebtasTi erI I c api t al .   ol l owi ngdeduct i onsshoul d bemadef r om Ti e rI Deduct i onsf r om Ti erICapi t al :Thef capi t al : ( a)I nt angi bl easset sand l ossesi nt hecur r entperi od and t hosebr oughtf orwardf r om pr evi ousperi odsshoul dbededuct edf r om Ti erIcapi t al ; ( b)Cr e at i o no fde f e r r e dt axas s e t( DTA)r e s ul t si n ani nc r e a s ei n Ti e rIc api t alo fabank  wi t houtany t angi bl easse tbei ng adde dt ot he banks ’bal ance shee t .Ther ef or e,DTA,  whi c hi sani nt angi bl easse t ,shoul dbededuct edf r om Ti erIcapi t al .

Deduct i onsf r om Ti erIandTi erI ICapi t al a.Equi t y/nonequi t yi nvest ment si nsubsi di ari es  Thei nv es t ment sofabanki nt heequi t yaswel lasnone qui t ycapi t ali ns t r ument si ssued  by a s ubsi di ar y ,whi c h ar er ec koned t owar ds i t sr e gul at or y capi t alas pe r nor ms pr escri bedbyt her espect i ver egul at or ,shoul dbededuct edat50percenteach,f r om Ti er IandTi erI Icapi t aloft hepar entbank,whi l eassessi ngt hecapi t aladequacyoft hebank on' sol o'basi s,undert heBaselIFr amework.

Li mi tf orTi erI Iel ement s  Ti e rI Ie l ement sshoul dbel i mi t edt oamaxi mum of100pe rc entoft ot alTi erIe l ement s f ort hepur poseofcompl i ancewi t ht henor ms. No t e :Ti e rI Ic api t alc anno tbemo r et hanTi e rIc api t al . El e me ntoft i e r I I Ic api t al ; • •

Shor tt er m subor di nat eddebt Shortt er m bondwi t hanori gi nalmat uri t yof2Yeara.

Not e:   Ti er I I Icapi t ali sl i mi t e dt o250% 

ofTi er I 28. 5% ofmarketr i skneedst obesupport edbyTi er I

Mi ni mum r equi r ementofCapi t alFunds

Banksar er equi r edt omai nt ai nami ni mum CRAR of9perce ntonanongoi ngbasi s. Commoncapi t alRat i o:  Ti e r Icapi t al -6%  Ti e r I ICapi t al -3%

Capi t alAdequacyRat i o: Capi t alAde quac yRat i o=( Ti e rIc api t al+(Ti e rI Ic api t al )/RWA RWA=Capi t al( Ti erI+I I )xCAR Capi t alade quac yr a t i o ( C)=Re gul at o r ycapi t al ( R) /T ot alr i s kwe i g ht e das s e t s ( T) . Regul at oryCapi t al‘ R’ =C* TandTot alRi skwei ght edAsset s‘ T’ =R/C  Tot al Ri sk wei ght ed asse t s =( Ri s k wei ght e d as se t sf or cr edi tr i sk) +( 12. 5* Capi t al r e qui r e me ntf o rmar ke tr i s k) +( 12. 5* Capi t alr e qui r e me ntf o ro pe r a t i o nalr i s k) NetI nt er estI ncome=I nt er estI ncome-I nt er estExpenses. NetI nt er estMargi n( NI M)=NetI nt er estI ncome/Aver aget ot alAsset s. Economi cEqui t yRat i o=Shar ehol der sf unds/Tot alasse t s. Pr o fit=I nt e r e s tI nc o me-I nt e r e s te x pe ns e-pr o v i s i o nf o rl o anl o ss+no ni nt e r e s t r eve nue–noni nt er estexpense–t axes. PROVI SI ON REQUI REMENT: LossAsse t

:100%

Doubt f ulAsse t ( Unsecur e dPor t i on)

:100%

Doubt f ulAsse t ( Sec ur ed–upt o1Ye ar )

:25%

Doubt f ulAsse t ( Sec ur ed–upt o3Ye ar )

:40%

Doubt f ulAsse t ( Secur ed–mor et han3ye ar) :100% Subs t andar d( Secur ed)

:15%

Subs t andar d( Uns ecur ed)

:25%

I nf r as t r uct ur eLoan

: 20%

ForStandar dAss et s: Di r ectadv ancet oAgr i& SME

:0. 25%

Commer ci alRealEs t at e

:1%

Hous i ngLoanwi t hTe aserRat es

:2%

Res t r uct ur edAdvances

:2. 75%

 Al lot he radv anc es Pr ov i si oni ngCov er ag eRat i o

:0. 40% =Pr ovi si onAmount /Gr ossNPA

Ri skAdj ust edRet ur non Capi t al( RAROC) : RAROC =Expect edRe t ur n/Economi cCapi t al . RAROC =Expec t edRe t ur n/Val ueatRi sk ( Rev enue–Expense s–Expec t edLoss+I ncomeFr om Capi t al ) /Capi t al . RAROC =Capi t al

ROA =

Re v enue–Expenses   Asset s

ROE =

Re v enue–Expenses   Equi t y

ROC =

Re v enue–Expenses   Capi t al

Modi fieddur at i on=McCaul ey' sdur at i on/(1+yi el d) % changei npr i ce=-modi fieddur at i on×yi el dchange