Which of the following may lead to the deterioration in credit profile of a bank? Statement
1) Bank's Capital adequacy falling below regulatory requirement. Statement
2) Rise in Slippage ratio

Question

Quizplus · Accepted Answer

Statement 1 is correct as a bank's capital adequacy falling below the regulatory requirement implies that the bank is not holding enough capital to cover its risk-weighted assets, which indicates weak financial health and a higher risk of default. This can lead to a deterioration in credit profile.
Statement 2 is also correct as a rise in slippage ratio means an increase in non-performing assets (NPAs) or bad loans, which signifies weak credit quality and deteriorating asset quality, leading to a decline in credit profile.

Which of the Following May Lead to the Deterioration in Credit