The worked question on this page is original educational practice. It is not represented as a question from an official previous-year examination paper.
01 / UNDERSTANDING
Review the question
Create an original two-stage exercise: compute the simple gap effect, then challenge one assumption. In paper analysis, inspect whether the question supplies time weights or asks only for directional sensitivity. Mark an answer incomplete if it reports an arithmetic result while ignoring a stated reset delay or unequal movement between the reference rates.
02 / UNDERSTANDING
The concept in context
The estimate becomes less reliable when loan and deposit rates respond differently, resets occur at different points within the interval or customer behaviour changes. Basis risk and embedded options can matter even when a headline gap appears small. A gap report is therefore an exposure indicator, not a complete forecast of earnings.
03 / UNDERSTANDING
A worked learning case
Assume a teaching bank has 120 units of assets and 90 units of liabilities repricing immediately for a full year. A hypothetical equal rise of one percentage point suggests a 0.30-unit increase in annual net interest income before other effects. The learner then changes deposit pass-through and observes why the simple estimate no longer captures the outcome.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
Does a positive repricing gap always guarantee higher realised earnings when rates rise?
Show the answer and reasoning
No; the result depends on repricing and behavioural assumptions.
The basic positive-gap result assumes comparable rate changes and timing on both sides of the balance sheet. Actual loan yields and deposit costs can move by different amounts or at different dates. Customer withdrawals, prepayments and new business also change the exposure, so the estimate should be interpreted with its assumptions.
Two traps to watch for.
- Using final maturity when an instrument reprices earlier.
- Applying a full-year shock to cash flows that reset later.
YOUR TOPIC-SPECIFIC LEARNING MAP
Learn from the attempt
Label the repricing date of each fictional position.
State the horizon and rate-pass-through assumptions.
Explain one reason actual earnings may differ from the estimate.
Explain the idea, apply it to a new situation, then check what changed in your reasoning.
BANKERS TUTORIAL · SOURCE NOTES
Keep the source alongside your notes.
Official links provide subject context and authoritative reference material. This guide’s explanation, scenario and question are original Bankers Tutorial learning content.
- iibf.org.in https://iibf.org.in/caiib-certified-associate-IIBF
- iibf.org.in https://iibf.org.in/documents/RulesSyllabus/2026/FlagshipCourses/60%20-%20CAIIB_24.07.25_Change_Final%20Website_23.02.2026.PDF
- www.rbi.org.in https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12456&Mode=0
For CAIIB preparation, check the current official notice before relying on changing dates, rules or examination requirements.
