Bank A has the following books

1 Year Fixed Deposit of NPR 100 Million @ 12% p.a.

3 Months Revolving Loan of NPR 100 Million @ 3 months NIBOR plus 4%

Bank B has the following books

1 Year Term Loan of NPR 100 Million @ 14% p.a.
3 Months Revolving Deposit of NPR 100 Million @ 3 months NIBOR plus 2%

Without Interest Rate SWAP

NIBOR Constant Decrease Increase
1st 3 months 10% 10% 10%
2nd 3 months 10% 9% 11%
3rd 3 months 10% 8% 12%
4th 3 months 10% 7% 13%

Position of Bank A
Interest Expense on 1 year Fixed Deposit (12,000,000) (12,000,000) (12,000,000)
Interest Income on 3 months Revolving Loan (Nibor plus 4%)
1st 3 months 3,500,000 3,500,000 3,500,000
2nd 3 months 3,500,000 3,250,000 3,750,000
3rd 3 months 3,500,000 3,000,000 4,000,000
4th 3 months 3,500,000 2,750,000 4,250,000
14,000,000 12,500,000 15,500,000

Profit / Loss 2,000,000 500,000 3,500,000

Position of Bank B
Interest Income on 1 year Term Loan 14,000,000 14,000,000 14,000,000
Interest Expense on 3 months Revolving Deposit (Nibor plus 2%)
1st 3 months (3,000,000) (3,000,000) (3,000,000)
2nd 3 months (3,000,000) (2,750,000) (3,250,000)
3rd 3 months (3,000,000) (2,500,000) (3,500,000)
4th 3 months (3,000,000) (2,250,000) (3,750,000)
(12,000,000) (10,500,000) (13,500,000)

Profit / Loss 2,000,000 3,500,000 500,000

With Interest Rate SWAP

Bank A and Bank B enters into Interest Rate SWAP
Bank A receives 1 Year Fixed Interest rate of 12%
Bank B pays 1 Year Fixed Interest rate of 12%
Bank A pays 3 months Nibor plus 2%
Bank B receives 3 months Nibor plus 2%

NIBOR Constant Decrease Increase

1st 3 months 10% 10% 10%
2nd 3 months 10% 9% 11%
3rd 3 months 10% 8% 12%
4th 3 months 10% 7% 13%

Position of Bank A
Interest Expense on 1 year Fixed Deposit (12,000,000) (12,000,000) (12,000,000)
Intererst Income of 1 Year Fixed Interest rate of 12% under IR SWAP 12,000,000 12,000,000 12,000,000
Interest Income on 3 months Revolving Loan (Nibor plus 4%)
1st 3 months 3,500,000 3,500,000 3,500,000
2nd 3 months 3,500,000 3,250,000 3,750,000
3rd 3 months 3,500,000 3,000,000 4,000,000
4th 3 months 3,500,000 2,750,000 4,250,000
14,000,000 12,500,000 15,500,000
Interest Expense on 3 months Revolving Rate (Nibor plus 2% under IR SWAP)
1st 3 months (3,000,000) (3,000,000) (3,000,000)
2nd 3 months (3,000,000) (2,750,000) (3,250,000)
3rd 3 months (3,000,000) (2,500,000) (3,500,000)
4th 3 months (3,000,000) (2,250,000) (3,750,000)
(12,000,000) (10,500,000) (13,500,000)

Profit / Loss 2,000,000 2,000,000 2,000,000

Position of Bank B
Interest Income on 1 year Term Loan 14,000,000 14,000,000 14,000,000
Intererst Expense of 1 Year Fixed Interest rate of 12% under IR SWAP (12,000,000) (12,000,000) (12,000,000)
Interest Expense on 3 months Revolving Deposit (Nibor plus 2%)
1st 3 months (3,000,000) (3,000,000) (3,000,000)
2nd 3 months (3,000,000) (2,750,000) (3,250,000)
3rd 3 months (3,000,000) (2,500,000) (3,500,000)
4th 3 months (3,000,000) (2,250,000) (3,750,000)
(12,000,000) (10,500,000) (13,500,000)
Interest Income on 3 months Revolving Rate (Nibor plus 2% under IR SWAP)
1st 3 months 3,000,000 3,000,000 3,000,000
2nd 3 months 3,000,000 2,750,000 3,250,000
3rd 3 months 3,000,000 2,500,000 3,500,000
4th 3 months 3,000,000 2,250,000 3,750,000
12,000,000 10,500,000 13,500,000

Profit / Loss 2,000,000 2,000,000 2,000,000

 Currency SWAP

Bank A receives USD 10 Million for 3 months from customer @ 3% p.a.

Bank A has excess liquidity of USD 10 Million for 3 months
Bank A has demand for NPR loan of NPR 800 Million for 3 months

Bank B receives NPR 800 Million for 3 months from customer @ 12% p.a.
Bank B has excess liquidity of NPR 800 Million for 3 months
Bank B has demand for USD loan of USD 10 Million for 3 months

Bank A and Bank B takes Foreign Exchange Risk

Bank A sells USD to Bank B at the beginning

Bank B sells USD to Bank A at the end of 3 months

USD Rate at the beginning 80

3 month Rupee Rate 12%
3 month USD Rate 3%
USD Rate at the end of 3 months 85

Position of Bank A
NPR received from sale of USD 10 Million NPR 800,000,000.00
Interest earned on NPR loan of 800 Million NPR 24,000,000.00
Interest paid on USD deposit of USD 10 Million USD (75,000.00)
Interest paid on USD deposit of USD 10 Million NPR (6,375,000.00)
NPR paid for USD 10 Million NPR (850,000,000.00)
Profit / Loss NPR (32,375,000.00)

Position of Bank B
NPR paid for Purchase of USD 10 Million NPR (800,000,000.00)
Interest paid on NPR deposit of 800 Million NPR (24,000,000.00)
Interest received on USD loan of USD 10 Million USD 75,000.00
Interest received on USD loan of USD 10 Million NPR 6,375,000.00
NPR received for USD 10 Million NPR 850,000,000.00
Profit / Loss 32,375,000.00

Bank A and Bank B enters into SWAP Deal for USD 10 Million

USD Rate at the beginning 80

3 month Rupee Rate 12%
3 month USD Rate 3%
SWAP charges 1.8
SWAP Rate 81.8
USD Rate at the end of 3 months 85

Position of Bank A
NPR received from sale of USD 10 Million NPR 800,000,000.00
Interest earned on NPR loan of 800 Million NPR 24,000,000.00
Interest paid on USD deposit of USD 10 Million USD (75,000.00)
Interest paid on USD deposit of USD 10 Million NPR (6,375,000.00)
NPR paid for USD 10 Million NPR (818,000,000.00)
Profit / Loss (375,000.00)

Position of Bank B
NPR paid for Purchase of USD 10 Million NPR (800,000,000.00)
Interest paid on NPR deposit of 800 Million NPR (24,000,000.00)
Interest received on USD loan of USD 10 Million USD 75,000.00
Interest received on USD loan of USD 10 Million NPR 6,375,000.00
NPR received for USD 10 Million NPR 818,000,000.00
Profit / Loss 375,000.00
nge Risk

80 80
12% 12%
3% 3%
75 80

(10M)
800,000,000.00 800,000,000.00
24,000,000.00 24,000,000.00
(75,000.00) (75,000.00)
(5,625,000.00) (6,000,000.00)
(750,000,000.00) (800,000,000.00)
68,375,000.00 18,000,000.00

10M
(800,000,000.00) (800,000,000.00)
(24,000,000.00) (24,000,000.00)
75,000.00 75,000.00
5,625,000.00 6,000,000.00
750,000,000.00 800,000,000.00
(68,375,000.00) (18,000,000.00)

USD 10 Million

80 80
12% 12%
3% 3%
1.8 1.8
81.8 81.8
75 80

(10M) 800M
 800,000,000.00 800,000,000.00
24,000,000.00 24,000,000.00
(75,000.00) (75,000.00)
(5,625,000.00) (6,000,000.00)
(818,000,000.00) (818,000,000.00) 10M (818M)
375,000.00 -

10M (800M)
(800,000,000.00) (800,000,000.00)
(24,000,000.00) (24,000,000.00)
75,000.00 75,000.00
5,625,000.00 6,000,000.00
818,000,000.00 818,000,000.00 (10M) 818M
(375,000.00) -