[Data Interpretation - 1] How to Calculate Division of two numbers quickly?

While solving Data Interpretation questions, you often need to divide two numbers e.g. to calculate percentages, percentage changes etc.which usually consumes time if you use traditional method of division. In this article you will learn how to divide two numbers quickly.

Let us take one question:

Question: Above Graph represents No. of units sold by Bajaj Auto in different segment from 2005 to 2008.

Ques1: In 2005, Scooters sales in volume is how much percentage of total sales.

           a)    53.65 %            b) 46.82%             c) 56.37%                 d) 59.82%

Solution:  In 2005, Scooters= 482

                            Total Sales= Scooters + Mopeds + Three Wheelers

                                              = 482 + 245 + 128

                                               =855

So,   Answer = 482/855 x 100

Ultimately, you are required to perform division to get the answer.

Now, I will discuss how to calculate the value of 482/855.

Step 1: Approximate your denominator to nearest century number. In this case approximate 855 to 900.

Step 2: Calculate approximate value of the given fraction, in this case take numerator 500 and denominator 900. So approximate value of the given fraction will be 5/9.

Step 3: If a fraction x/y is given and you increase/decrease the numerator and denominator in the ratio x : y the value of fraction does not change.

Let us understand it taking an example:

Given ratio: 5/9

If I increase numerator by 5 and denominator by 9 , new fraction = 10/18= 5/9

If I increase numerator by 10 and denominator by 18 , new fraction = 15/27= 5/9

If I increase numerator by 25 and denominator by 45 , new fraction = 30/54= 5/9

If I decrease numerator by 15 and denominator by 27 , new fraction =  -10/-18= 5/9

Step 4: Since we have calculated approximate value of fraction= 5/9.

Above calculation division becomes easy if you make denominator 900. 

482/855= (482+x)/900

Increase in denominator = 900 – 855 = 45

So, if increase in numerator = 25 ;the value of fraction will not change. (since25/45=5/9 as discussed in step 3)

482/855 = (482+25)/(855+45) = 507/900 = 0.5633

So, Answer will be 56.33%

If you use calculator and find the exact value of fraction 482/855= 0.5637.

So, what we calculated using approximation is very close to actual value. If you look at the options, 

You got the answer which is option [C]

So if you practice above method you can calculate any fraction very easily.

Question2: What is percentage increase in sales of scooter in 2008 w.r.t. 2007?

  a)    25%            b) 28%                   c) 31%                 d) 29%

Solution: % increase in sales = (614-476)/476 * 100

                                                 = 138/476 * 100

Approximate value of 138/476 = 150/500 = 3/10 = 0.3/1

138/476 = (138+x)/500 

Increase in denominator = 500 – 476 = 24

Corresponding Increase in Numerator= 24 x 0.3 = 7.2 

So, 138/476 = (138+7.2) / (476+24) = 145.2/500 = 0.2904

Answer = 29.04 % 

Hence option D is correct.

If you use calculator and find out the exact value of 138/476 = 28.99%

So, Practice this method of division which will be very helpful in saving your time In Data Interpretation.

You must also see :

[Data Interpretation-2] Calculating Percentage Growth/Increase/Decrease

[Data Interpretation-3] Calculation Techniques

What is a Non-Performing Asset (NPA)? How assets are classified?

Assets for a bank are the loans it has given and investment made by the bank. Most important assets for banks are loans given by it. Similarly, banks make investment in government securities by purchasing them.

Usually, the health as well as the financial condition of a bank is measured through the proportion of bad assets or Non Performing Assets with it.

Simply, NPA indicates the amount of loan that was not returned by the customer. An asset becomes non-performing when it ceases to generate income for the bank.

As per the current norm, if a loan is overdue during the last 90 days, it will be categorized as a Non Performing Asset (NPA). A loan whose interest and / or installment of principal have remained 'overdue due' for a period of 90 days is thus considered as NPA. Overdue is a situation where the loan is not paid by the due date fixed by the bank.

From the banks’ health point of view, higher the NPA, lower will be its health. Attempt to strengthen a bank is mainly concentrated on NPA management.

Some of the assets of the banks may not have returned or were not repaid for a considerable point of time. Here, to measure the seriousness of repayment delay, assets are classified into different categories.

How assets are classified?

Assets of a bank are classified in terms of its repayment status. Standard assets, substandard assets, doubtful assets and loss assets are classifications of asset quality.

For a bank, classification of assets into different categories should be done taking into account credit weaknesses and the extent of dependence on collateral security for realization of dues.

What is a standard asset?

Standard Asset is one which does not disclose any problems and which does not carry more than normal risk attached to the business. Such an asset should not be an NPA.

What is a substandard asset?

A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months.  

What is a doubtful asset?

An asset would be classified as doubtful if it has remained in the substandard category for a period of more than 12 months. 

What is a loss asset?

A loss asset is one where loss has been identified by the bank or internal or external auditors or by the RBI inspection but the amount has not been written off wholly. In other words, such an asset is considered uncollectible.

Loss assets should be written off. If loss assets are permitted to remain in the books for any reason, 100 percent of the outstanding should be provided for. This means that full amount of the loss assets should be kept from some other sources like profit of the bank to meet the loss.

The mechanism of Provisioning is done to address the asset quality deterioration for a bank’s assets. The worse is the assets’ quality; higher will be the provisioning coverage ratio. Banks should make provision against substandard assets, doubtful assets and loss assets in a differential manner.

To know more about PROVISIONING Click Here

What is provisioning? What is Provisioning Coverage Ratio?

One of the leading issues related with the banking sector nowadays is the rising level of NPAs. Higher NPAs worsens the financial health of a bank. To tackle the NPA or bad assets problem, RBI has designed several mechanisms. An import one among them is the Provisioning norms.

Under provisioning, banks have to set aside or provide funds to a prescribed percentage of their bad assets. The percentage of bad asset that has to be ‘provided for’ is called provisioning coverage ratio. The provisioning coverage ratio is the percentage of bad assets that the bank has to provide for (keep money) from their own funds –most probably profit.

For example, if the provisioning coverage ratio is 70% for a particular category of bad loans, banks have to set aside funds equivalent to 70% those bad assets out of their profits (in most cases).  Provisioning is a part of the RBI’s prudential regulation norm.

Assets of a bank means loans they have given and investment they have made. If the loans are not coming, there should be provisioning for such bad debts. The assets are classified by the RBI in terms of their duration of non-repayment.

To know about NPAs Click Here

Provisioning differs with asset quality  

Provisioning coverage ratio differs in terms of the quality of assets. Some assets may be lost forever and they are categorized as loss assets. This implies that such loans will never be repaid. For such assets, bank has to set aside 100% of such loss assets out of its profit. Similarly, there may be substandard assets where the loans are not repaid for a shorter period. In this case, less proportion of those assets can be set aside from profit.

When banks report profits, they give low dividends now a day because of the provisioning requirement. Many banks have substantial NPAs now and they are setting apart a major chunk of their profit to meet the provisioning.

What is current account deficit? What are the features of India’s current account deficit?

The current account of country shows its profile in goods and services trade. Technically, the current account of the balance of payments explains the money value of goods and service (services is contained under invisibles) exported and imported by the country during an accounting period.

To understand the Current Account Deficit (CAD), we should have an idea about Balance of Payments.

What is balance of payments (BoP) account?

Usually citizens and companies of a country make several types of transactions with other countries. Basically, there are three types of transactions: trade in goods, trade in services (or in a broader sense invisibles) and capital transactions.  

Balance of payment account of India is a systematic statement of all economic transactions between the residents of India and the residents of the rest of the world in an accounting period (say one year).

The BoP as a classification format, classifies the BoP account into two:

• Current account transactions that involves exports and imports of goods and services (services are incorporated under invisibles). And
• Capital account transactions that involve the flow of investable money to and from India.

What are the components of current account?

Current account has two components – exports and imports of goods and export and imports of invisibles (include services). Hence the current account has two subcomponents:

1. Merchandise trade account ( for exports and imports of goods) and
2. Invisible account ( for services, remittances and income)

Merchandise trade account: gives the money value of India’s exports and imports of goods. When we often mention exports and imports, it is about the merchandise account.

Invisible account: indicate India’s

 (a) Service exports and imports (software exports, tourism revenues, etc, various service imports)

(b) Remittances (private remittances from abroad and payment to foreign countries)

(c) Income (income earned by MNCs from their investment in India).

India’s current has some common trends during many years. First is that the country has a strong trade deficit. This means that exports of goods are significantly lower than imports of goods. Second, India has a reasonably good invisible surplus (because of software exports and remittance inflows). But for most years, the trade deficit will be higher than invisible surplus.  This in turn produces a current account deficit for the country in most years.  

The following table shows a typical current account situation for India. Minus sign indicates deficit whereas the plus sign indicates surplus.  

The Current Account

                                                                                  In US $ billion

  1. Trade balance (A+B)                                                  -190

  2. Invisible balance(C+D)                                     +100

  3. Current account balance (1+2)                               -90

The table shows that the country has a current account deficit of $ 90 billion.

(The figures in the table are approximation of the 2012-13 figures for India; Source: RBI)

          

As per the table, India had a trade deficit and invisible surplus for the year. Considerable invisible surplus helped India to offset most of the big trade deficit. But since the invisible surplus was lower than trade deficit, the current account of the country registered a deficit of $90 bn.

Since, balance of payment indicates transactions with other countries, it holds some extra importance. Most importantly the transactions are done through foreign currencies. We call such currencies as hard currencies or international reserve currencies (eg. US $). Hence, the export and imports of goods and services or capital inflow or outflow that takes place from and to India are expressed in terms of US $ in India’s balance of payment account.

What is Banking Ombudsman Scheme?

Banking Ombudsman Scheme is a mechanism created by the RBI to address the complaints raised by bank customers. It is run by the RBI directly to ensure customer protection in the banking industry.

According to the RBI, “The Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks.”

The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995. The present Ombudsman scheme was introduced in 2006.

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India. He has the responsibility to redress customer complaints against deficiency in certain banking services. At present fifteen Ombudsmen were appointed by the RBI to settle complaints and they are appointed in state capitals.

All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Scheme.

The Banking Ombudsman can receive and consider any complaint relating to a number of deficiencies related to banking operations including internet banking. RBI has mentioned a large number of service deficiencies by banks to customers where the customers can approach the Ombudsman through a complaint.

Following are some of the instances:

• non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc.;
• non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission in respect thereof;
• non-acceptance, without sufficient cause, of coins tendered and for charging of commission in respect thereof;
• non-payment or delay in payment of inward remittances ;
• failure to issue or delay in issue of drafts, pay orders or bankers’ cheques;
• non-adherence to prescribed working hours ;

When a customer can approach the Ombudsman?

A customer can file a complaint before the Banking Ombudsman if the bank doesn’t gives a reply to the customer within a period of one month or the bank rejects the complaint, or if the complainant is not satisfied with the reply by the bank.