Investment Banking Assignment - 1

Submitted by- Ananya Verma

PGP12110

Q 1: How much percentage of total funds can commercial banks use in investments?

Ans.

• The aggregate market value of SLR securities held in the HTM category is not greater
than a predetermined threshold (19.5% of NDTL as of this writing). This cap may
occasionally be established by the Reserve Bank.
• Until then, banks may exceed the cap up to an overall limit of 23% of NDTL (instead
of 19.5%), provided that the excess is attributable to SLR securities purchased
between September 1, 2020, and March 31, 2023.
• Under the HTM category, investments that account for more than 25% of the bank's
overall investments are prohibited.
• Banks may contribute up to 10% of their paid-up capital or unit capital to category I
and category II funds, but not to category III funds.

Q 2: Why did 2008 financial crisis have more impact on stock markets than covid 19?

Ans.

• Ambiguity: The 2008 worldwide stock market collapse was marked by a great deal of
ambiguity. In reality, developed economies had an impact on emerging nations like
India. Investors quickly withdrew their money from the Indian stock markets as a
result of the uncertainty.
• Public education: As the COVID-19 pandemic spread from nation to nation, banks
began to take preventative measures by altering lending policies and interest rates, as
well as educating the public about the impending epidemic and protecting faith in
financial institutions.
• Government help: Unlike the 2008 financial crisis, COVID 19 sees substantial
government assistance and support. Compared to the financial crisis of 2008, these
protections lessened stock market volatility.