Module: | MODULE B: RISK MANAGEMENT
Q463: A commercial bank projects total expected cash outflows of Rs. 200 crore over the next 30 days under a stress scenario. Its total expected cash inflows over the identical period are projected at Rs. 180 crore. Calculate the final Net Cash Outflows (NCOF) after applying the mandatory regulatory inflow cap.
✅ Correct Answer: B
The correct answer is B. To find the Net Cash Outflows (NCOF), one must apply the regulatory cap on expected cash inflows.
The rule states that total cash inflows are subject to an aggregate cap of 75 percent of total expected cash outflows.
This ensures banks must hold a minimum level of HQLA equal to at least 25 percent of their outflows.
Step 1: Identify Total Outflows = Rs.
200 crore.
Step 2: Calculate the Inflow Cap = 75 percent of 200 = Rs.
150 crore.
Step 3: Compare actual inflows to the cap.
Actual inflows are Rs.
180 crore, but we can only use the capped amount of Rs.
150 crore.
Step 4: Calculate NCOF = Total Outflows - Capped Inflows (200 - 150 = 50). Therefore, the final NCOF is Rs.
50 crore.
The rule states that total cash inflows are subject to an aggregate cap of 75 percent of total expected cash outflows.
This ensures banks must hold a minimum level of HQLA equal to at least 25 percent of their outflows.
Step 1: Identify Total Outflows = Rs.
200 crore.
Step 2: Calculate the Inflow Cap = 75 percent of 200 = Rs.
150 crore.
Step 3: Compare actual inflows to the cap.
Actual inflows are Rs.
180 crore, but we can only use the capped amount of Rs.
150 crore.
Step 4: Calculate NCOF = Total Outflows - Capped Inflows (200 - 150 = 50). Therefore, the final NCOF is Rs.
50 crore.