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
Compare a fixed-asset case with a floating-asset case before studying more elaborate interest-rate-risk measures. Put rate-reset dates on one timeline before calculating the interest spread. For a later review, distinguish income exposure from valuation exposure. Keep a specific error note about assuming higher rates always increase a bank’s net interest income. Use a changed example after a short gap so that remembering one answer does not disguise a remaining misunderstanding.
02 / UNDERSTANDING
The concept in context
Interest-rate risk arises when rate changes affect asset values, funding costs or income differently. A bank’s exposure depends on repricing schedules and cash-flow characteristics, rather than simply on whether interest rates rise or fall. Compare when assets reprice with when liabilities reprice, then separately consider changes in the market value of fixed cash flows.
03 / UNDERSTANDING
A worked learning case
A fictional bank earns a fixed 8 on a 100-unit asset and initially pays 3 on matching funding. Its simplified annual spread income is 5. If funding reprices to 5 while asset income remains fixed at 8, spread income falls to 3. The example isolates a timing mismatch rather than predicting every bank’s response to rising rates.
ORIGINAL EDUCATIONAL PRACTICE
Try it before you check.
How much does the stated spread income fall after funding reprices?
Show the answer and reasoning
2 units.
Initial spread income is 8 minus 3, equal to 5. After the funding cost rises, it is 8 minus 5, equal to 3. The difference is 2. Because asset income is held fixed in the example, the funding repricing is not offset; a different repricing structure could produce another result.
Two traps to watch for.
- Assuming higher rates always increase a bank’s net interest income.
- Ignoring whether the asset and funding reprice at different times.
YOUR TOPIC-SPECIFIC LEARNING MAP
Build your next study session
Place asset and liability repricing dates together.
Calculate income and funding cost separately.
Distinguish income exposure from valuation exposure.
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.
- m.rbi.org.in https://m.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=711
- rbi.org.in https://rbi.org.in/scripts/PublicationsView.aspx?Id=18086
For RBI preparation, check the current official notice before relying on changing dates, rules or examination requirements.
