Feature Post

UFBU Calls Off Nationwide Bank Strike on 24th and 25th Mar 2025 After Assurances from Finance Ministry and IBA

I n a significant development on March 21, 2025, the United Forum of Bank Unions (UFBU) has decided to call off their two-day nationwide strike, which was originally planned for March 24 and 25. This decision was made after the UFBU received positive reassurances from both the Finance Ministry and the Indian Banks’ Association (IBA) regarding their key demands. The banking unions, under the umbrella body of UFBU, represent employees from nine major unions across the country, including AIBEA, AIBOC, NCBE, AIBOA, and BEFI. The unions had earlier called for the nationwide strike to protest against several ongoing issues that they believe impact the welfare and job security of bank employees. Key Issues Behind the Proposed Strike The strike was initially called by UFBU to address a range of pressing concerns, some of which have been lingering for years. The union's main demands included: Five-Day Workweek for Bank Employees:  One of the most anticipated demands was the implementation o...

RAROC (Risk Adjusted Return on Capital)

RAROC & Economic Capital -
(Risk adjusted Return on Capital)


  • RAROC helps the bank to decide whether the business with its risk profile and budget economic capital add shareholders value or not.
  • RAROC is a measure of the expected return on economic capital over the life of an investment.
  • RAROC = Risk - Adjusted Return(Income)/Economic Capital.
  • Risk Adjusted Return = Revenue - Funding Cost or TPM - Credit Provisions(for expected losses)  - Administrative Expenses  - Capital Charge on RWA 



Uses Of RAROC

  • It is an improvement over the traditional approach in that it allows one to campare two businesses with different risk(volatility of returns) profiles.
  • Using the hurdle rate (expected rate of return), a lender/financial institution can also use the RAROC principles to set the target pricing for a relationship or a transaction.


Inputs Used For Calculation Of RAROC  - 

  • PD - Probability of Default
  • LGD - Loss Given Default
  • EAD - Exposure of Default
  • M - Maturity & Correlation Factor                               
Risk Adjusted Performance Measure(RAPM)
Example - Forex Dealer Position -$100 m 
Volatility - 12%
Confidence land - 99% or  2.33 Standard Deviation ,
Risk Capital Required is Rs = 100000000X0.12X2.33 = $27960000

RAPM = Profit/Risk Capital.


Comments