SECTION B - CASE STUDY (15 Marks, all questions are compulsory) B1. ABAB Bank of India is a small bank with mostly retail and a meagre corporate exposure. In 2008, the Reserve Bank of India (RBI) asked ABAB Bank to compute Capital Adequacy ratio (CAR\%) by implementing Basel 2 rules, and assess shortfall or excess capital considering a minimum CAR requirement of 12%. The bank reported INR. 300,000 revenues in 2008 , growing by INR. 50,000 every year in the last 3 years. Since the bank caters mainly to the retail banking customers, about 80% of its loans and revenues are from retail segment and pending from the corporate segment (all unrated customers attracting risk weights of 100% ). The bank's investment securities portfolio comprises equal exposure to indexed securities (long position), and gold (long position). The detailed balance sheet of the bank is provided below: Based on the details provided above, answer the following questions: a) Calculate the Basel 2 compliant gross credit risk, operational risk and market risks for the bank? b) What is the break-up of the Tier 1 and Tier 2 capital for the bank? c) Compute the Basel 2 capital adequacy ratio for the bank and comment on the capital adequacy levels