Looking for the most important Liquidity Coverage Ratio (LCR) for your upcoming exams? We have analyzed past papers for RBI Grade B Exam, SBI PO, IBPS PO, and Bank Promotion Exams to bring you the 12 most expected questions. Take the live test, review the blueprint, and master the core concepts.
- 🚀 Updated for 2026: Aligned with the latest RBI Grade B Exam, SBI PO, IBPS PO, and Bank Promotion Exams syllabus.
- 🧠 Output & Concept Based: Covers basics to advanced scenarios.
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- 📥 Free PDF Notes: Available instantly via our Telegram channel.
Test Blueprint & Topic Weightage
| Section / Topic | Question Range | Difficulty Level |
|---|---|---|
| Objective, Scope & Regulatory Baseline | Q1 – Q3 | Easy to Medium |
| HQLA Classifications & Haircuts | Q4 – Q6 | Medium |
| Run-off Rates & Cash Outflows/Inflows | Q7 – Q9 | Medium to Hard |
| Stress Scenarios & Monitoring Tools | Q10 – Q12 | Hard |
⚠️ Examiner Trap Alert: Examiners frequently trick candidates by mixing up the haircut percentages for Level 2 assets and understating the credit rating downgrade severity. Always remember that Level 2 assets are capped at 40% total (with 15% and 50% haircuts for 2A and 2B), and the severe stress scenario strictly assumes a 3-notch downgrade, not 1 or 2.
📚 Interactive Question Bank
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✅ | Objective, Scope & Regulatory Baseline
Q1What is the primary objective and mathematical definition of the Liquidity Coverage Ratio (LCR)?Q2Which of the following statements regarding the scope, application, and stress scenario of the LCR are correct?Q3Which of the following correctly describes the "Consolidated LCR" treatment for cross-border banking groups?
✅ | HQLA Classifications & Haircuts
Q4Which of the following assets qualify as Level 1 High Quality Liquid Assets (HQLA) without any haircut or limit?Q5Regarding the caps and haircuts for Level 2 HQLA, which of the following combinations is correct?Q6To ensure operational readiness, banks must adhere to specific "Operational Requirements" for their HQLA stock. Which of the following is NOT a valid requirement?
✅ | Run-off Rates & Cash Outflows/Inflows
Q7How are "Cash Outflows" calculated for the following specific deposit categories?Q8A bank pledges a deposit to secure a loan. Under what conditions can this pledged deposit be EXCLUDED from LCR outflows?Q9Regarding "Cash Inflows" and "Reverse Repos," which of the following scenarios is correct?
✅ | Stress Scenarios & Monitoring Tools
Q10Which of the following correctly matches the LCR "Monitoring Tool" with its function?Q11In the LCR stress scenario, how are "Downgrade Triggers" and "Collateral Substitution" treated?Q12Regarding "Derivative Cash Outflows," how must a bank calculate the increased liquidity need related to market valuation changes?
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High-Yield Core Concepts
30-Day Stress Horizon
The LCR promotes short-term resilience by requiring banks to maintain sufficient High Quality Liquid Assets to survive a severe 30-day financial shock.
Strict Haircuts and Caps
Under the RBI Liquidity Framework, Level 1 assets face zero haircuts, whereas Level 2 assets are strictly capped at 40% of the overall stock.
Deposit Run-Off Dynamics
Stable retail deposits feature a 5% run-off, while operational deposits drastically increase Net Cash Outflows by incurring a 25% run-off rate.
Severe Downgrade Assumptions
Basel III Liquidity Standards mandate that banks assume a severe 3-notch credit rating downgrade and collateral substitution risks during stress testing.
Semantic Comparison
| Feature / Metric | Liquidity Coverage Ratio (LCR) | Net Stable Funding Ratio (NSFR) |
|---|---|---|
| Core Definition | Maintains HQLA to cover total net cash outflows over 30 days. | Ensures stable funding profiles in relation to off-balance sheet activities over 1 year. |
| Primary Use Case | Surviving immediate, short-term liquidity shocks. | Promoting long-term structural funding resilience. |
| Exam Importance | Highly tested on HQLA caps, haircuts, and run-off percentages. | Frequently tested as the complementary long-term Basel III metric. |
Frequently Asked Questions
Why is Liquidity Coverage Ratio (LCR) critical for RBI Grade B Exam, SBI PO, IBPS PO, and Bank Promotion Exams?
It is a consistently high-scoring area. Examiners frequently repeat core concepts from this section, especially regarding Basel III guidelines and RBI’s liquidity framework.
Does this mock test cover the full syllabus?
Yes, these questions target the most highly-weighted concepts found in previous years’ papers, spanning HQLA rules, run-off rates, and stress scenarios.
What are the most repeated topics?
Based on our blueprint, HQLA Classifications & Haircuts and Deposit Run-off Rates carry the highest weightage.
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