The payments bank should have a leverage ratio of not less than.....that is its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

The payments bank should have a leverage ratio of not less than____that is its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).

A	3 per cent
B	4 per cent
C	5 per cent
D	6 per cent

Explanation:

Detailed explanation-1: -It should have a leverage ratio of not less than 3 per cent, i.e., its outside liabilities should not exceed 33.33 times its net worth (paid-up capital and reserves).

Detailed explanation-2: -A bank’s leverage ratio indicates its financial position regarding its debt and capital or assets. One may calculate it by Tier 1 Capital divided by consolidated assets, where Tier 1 Capital includes common equity, reserves, retained earnings, and other securities after subtracting goodwill.

Detailed explanation-3: -As announced in the Statement on Developmental and Regulatory Policies issued with the Second Bi-Monthly Monetary Policy Statement 2019-20 on June 6, 2019, it has been decided that the minimum Leverage Ratio shall be 4% for Domestic Systemically Important Banks (DSIBs) and 3.5% for other banks.

Detailed explanation-4: -The payments bank shall be required to maintain a minimum capital adequacy ratio of 15 per cent of its risk weighted assets (RWA) on a continuous basis, subject to any higher percentage as may be prescribed by RBI from time to time.

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