Question

Q. In the context of the Indian Banking sector, which of the following correctly describes the “Provisioning Coverage Ratio”?

• A.
  The extent of funds a bank has to keep aside to balance the loan losses.
• B.
  The proportion of the loan a bank will waive off for a Non Performing Asset.
• C.
  The amount of liquid funds a bank must keep with the central bank in a year.
• D.
  The quantity of assets that is taken as a guarantee while sanctioning a loan.

Answer 1

The correct option is A

The extent of funds a bank has to keep aside to balance the loan losses.
Explanation:
Provisioning Coverage Ratio (PCR) implies the ratio of provisioning to gross NPAs (non-performing assets). It indicates the extent of funds a bank has kept aside to cover loan losses.