This is an original preparation plan, not a new examination announcement. Check dates, stages, eligibility and application instructions in the issuing authority’s current notice.
01 / UNDERSTANDING
Plan your preparation
Build three schedule rows by hand before using a financial calculator. Check each opening balance against the preceding closing balance, and maintain separate notes for actual contractual features that the example excludes. After calculating three rows, explain why the interest portion changes while the assumed payment stays level. Then introduce a missed or extra payment only with explicit rules for the exercise. Keep the new scenario separate so the learner can identify which original assumptions no longer apply.
02 / UNDERSTANDING
The concept in context
In a simplified reducing-balance loan, each period's interest is calculated on the outstanding principal under the stated rate convention. The instalment first covers that interest and the remainder reduces principal. The next period begins with a lower balance if all amounts are paid as assumed.
03 / UNDERSTANDING
A worked learning case
A teaching loan begins a period with ₹10,000 outstanding, an assumed monthly rate of one per cent and a ₹1,000 payment. Interest is ₹100 and principal reduction is ₹900, leaving ₹9,100 before the next period. The example excludes fees, missed payments and day-count complications to isolate amortisation mechanics.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
In the stated example, how much of the ₹1,000 payment reduces principal?
Show the answer and reasoning
₹900.
Period interest is one per cent of the ₹10,000 opening balance, or ₹100. Subtracting that interest from the ₹1,000 payment leaves ₹900 to reduce principal. The closing balance is therefore ₹9,100 under the simplified assumptions, rather than ₹9,000 or an unchanged ₹10,000 balance.
Two traps to watch for.
- Treating the entire instalment as principal repayment.
- Assuming equal instalments always contain equal amounts of interest.
YOUR TOPIC-SPECIFIC LEARNING MAP
Build your next study session
Calculate interest from the stated opening principal balance.
Split the payment into interest and principal portions.
Carry the closing balance into the next assumed period.
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/jaiib-junior-associate-IIBF
- iibf.org.in https://iibf.org.in/documents/RulesSyllabus/2026/FlagshipCourses/21%20-%20JAIIB-Final_Exam_24.07.25_Final_23.02.2026.pdf
- www.rbi.org.in https://www.rbi.org.in/commonperson/English/Scripts/PressReleases.aspx?Id=2123
For JAIIB preparation, check the current official notice before relying on changing dates, rules or examination requirements.
