Sunday, 19 October 2014


1. Which of the following is not a debt instrument in banking parlance?
a) a Certificate of deposit
b) Bonds
c) Stocks
d) Commercial papers
e) Debentures

2. Which of the following is NOT a scheduled Commercial Bank?
a) HDFC Bank
b) Axis Bank
c) IDBI Bank
e) SBI

3. Which of the following organizations/ agencies is not associated with banking and Finance?
c) RBI

4. Who amongst the following Padma Bhushan Awardees is a famous banker?
a) Mr. Azim H. Premji
b) Ms. Chanda Kochhar
c) Ms. Kapila Vatsyayan
d) Mrs. Waheeda Rehman
e) Mr. Brajesh Mishra

5. Which of the following has been renamed as "Annual Policy Statement" by the Reserve Bank of India?
a) Busy season banking policy
b) Slack season banking policy
c) Monetary and credit policy
d) Annual statistical report
e) None of the above

6. Which committee has recommended introduction of smart card?
a) Rangarajan committee
b) Saraf committee
c) Nayak committee
d) Pannirselvan committee
e) None of the above

7. Which committee had formulated consultative profile in connection with electronic funds transfer?
a) A.K. Purwar committee
b) Y V Reddy committee
c) K S Shere committee
d) S. A. Dave committee
e) None of the above

8. The process of transformation of physical shares, commercial paper or certificate of deposit into
electronic form is called as:
a) Electronic clearing service
b) Electronic securitization
c) Share truncation
d) Dematerialisation
e) None of the above

9. Providing banking services to a customer without his entrance inside the bank's branch is called
a) Virtual banking
b) Relationship banking
c) Universal banking
d) Mobile banking
e) None of the above

10. Where is the headquarters of "Society for worldwide Inter bank Financial Telecommunication
- SWIFT" situated?
a) New York
b) Los Angels
c) Brussels
d) Hague
e) None of the above

11. Where has National Financial Switch of IDRBT established?
a) Mumbai
b) New Delhi
c) Hyderabad
d) Bangalore
e) None of the above

12. If the employees of the bank go on strike, it results in?
a) Operational risk
b) Employee risk
c) Credit risk
d) Market risk
e) Systemic risk

13. Which of the following is not included in three pillars of BASEL capital accord?
a) Minimum capital requirement
b) Supervisory review
c) Market discipline
d) Core banking solution
e) None of the above

14. When ICICI Limited merged with ICICI bank?
a) 1st August, 2000
b) 1st August 2001
c) 1st August, 2002
d) 1st August, 2003
e) None of the above

15. Which bank has changed its name to AXIS bank limited?
a) Centurion bank
b) Times bank
c) Bank of Punjab Limited
d) Bank of Karad
e) UTI bank limited

16. Times Bank Limited merged with:
a) HDFC Bank
b) Bank of India
c) Punjab National Bank
d) Central Bank of India
e) None of the above

17. Which of the following Banks & Head Offices is not correct?
a) State Bank of Bikaner & Jaipur - Jaipur
b) State Bank of Hyderabad - Hyderabad
c) State Bank of Mysore - Mysore
d) State Bank of Patiala - Patiala
e) State Bank of Travancore - Thiruvananthapuram

18. CCIL stands for:
a) Cement Corporation of India Limited
b) Central Clearing Company Ltd.
c) Clearing Corporation of India Limited
d) Cash Credit facility in Installment Lending
e) None of the above

19. When was Reserve Bank of India Nationalized?
a) 1947
b) 1948
c) 1949
d) 1950
e) 1952

20. Which one of the following is the new sub-category of the commercial real estate sector (CRE) as per the latest RBI directive?
a) Residential projects
b) Commercial projects
c) Industrial projects
d) SEZ projects
e) None of the above

21. In India, the Chit funds are governed / Regulated by ___?
a) RBI
b) Central Government
c) State Governments
d) Local Bodies
e) State Finance Corporation

22. "The bank for a changing world" is the punch line of:
a) BNP Paribas
b) Scotia Bank
c) Royal Bank of Scotland
d) CITI Bank
e) American Express Bank

23. The RBI is also set to introduce a fifth Deputy Governor in the top management of the central
bank. The fifth Deputy Governor will be designated as ___
a) COO (Chief Operating Officer)
b) CFO
c) CEO
d) CAO
e) None of these

24. What is the RBI's model for rating of Indian banks?
e) None of these

25. Oriental Bank of Commerce was established in the year:
a) 1943
b) 1953
c) 1963
d) 1973
e) 1983

26. What is the Punch line of "ICICI Bank"?
a) World's Local Bank
b) We Understand Your World
c) Hum Haina …
d) Serving to Empower
e) Good people to grow with

27. Who is the CMD of Union Bank of India?
a) R. M. Malla
b) S. Raman
c) M D. Mallya
d) T. M. Bhasin
e) Arun Tiwari

28. Which among the following is correct full form of CAS in context with banking markets in India?
a) Cash Authorization Scheme
b) Credit Authorization Scheme
c) Credit Access System
d) Credit Arrangement System
e) Cash Accreditation Scheme

29. A medium term note (MTN) programme is issued to ___
a) Provide loans
b) Raise Funds
c) Sell Equity
d) Purchase shares
e) Any of the above

30. Which among the following regulate the commodity markets in India?
1) RBI
3) Forward Market Commission
Choose the correct option from the codes given below:
a) Only 1 & 2
b) Only 2 & 3
c) Only 1 & 3
d) Only 3
e) None of the above

31. Which among the following is a major qualitative control measure used by RBI?
a) Bank Rate Policy
b) Open Market Operations
c) Ways and means advances
d) Reserve Ratio Requirements
e) Margin Requirements

32. Which of the following is known as plastic money?
a) Bearer cheques
b) Credit cards
c) Demand drafts
d) Gift cheques
e) None of these

1) c 2) d 3) e 4) b 5) c 6) b 7) c 8) d 9) a 10) c
11) c 12) a 13) d 14) c 15) e 16) a 17) c 18) c 19) c 20) a
21) c 22) a 23) a 24) b 25) a 26) c 27) e 28) b 29) b 30) d
31) e 32) b

Sunday, 12 October 2014

RBI Rates as on 30th September 2014 RBI's fourth bi-monthly monetary policy statement of 2014-15

★ Bank Rate: 9% 
★ CRR (Cash Reserve Ratio): 4%
★ Repo Rate: 8% 
★ Reverse Repo Rate: 7%
★ SLR (Statutory Liquidity Ratio): 22%


Bank Rate:
Bank rate is a rate of interest. It is an official rate of interest of RBI. It is also a minimum rate of interest at which RBI advances loans to Banks and financial institutions. RBI lends to banks and financial institutions by rediscounting the approved first class bills of exchange of banks as security. So this Bank rate is also called as Discount rate. It is also an instrument used for credit control.
★ RBI uses Bank rate to control inflation or deflation. If inflation in the country is high and it is keeping on mounting RBI increases the Bank rate in order to bring down the inflation. In case of deflation, RBI decrease the Bank rate which allows more money supply in the economy and deflation will be in control.

Cash Reserve Ratio (CRR):
Cash reserve ratio is a quantitative method of monetary control. This is an instrument used by RBI to control credit in the economy. Cash reserve ratio means the percentage of cash that scheduled banks need to be deposited with RBI. The percentage is calculated on the Net Demand and Time Liabilities (NDTL) of the bank deposits at any given point of time. This is a mandatory reserve to be kept by the banks to meet the unexpected withdrawals from customers.

Statutory Liquidity Ratio (SLR):
This is also a quantitative measure takes by RBI in order to control the credit supply in the economy. This is the minimum statutory reserve that scheduled banks must maintain with RBI at any given point of time. The statutory reserves are of liquid assets of banks like gold, cash in hand, Government securities, current account balances with other banks etc.

Repo Rate:
Repo rate or Repurchase Rate is at which RBI lends to banks for short periods. This is a debt instrument used by RBI to control money supply in the economy. In order to lend loan to banks, RBI ask Treasury bills and dated government securities as guarantee from banks. RBI repurchases those Government securities at a predetermined rate (which is known as Repo Rate) and date.

Reverse Repo Rate:
Reverse Repo rate is at which RBI barrow from banks. This is also a debt instrument used by RBI to control money supply in the economy. If RBI wants money then it will like to borrow from banks at a reverse repo rate by selling treasury bills at predetermined rate (which is known as Reverse Repo Rate) and dated government securities.

Banking Knowledge Practice Questions

1. Reserve Bank of India's reserve ratios are ....
a) SLR
b) CRR
d) Only a and b
e) Reverse REPO

2. If the bank rate is increased by RBI then ......
a) The lending rates of commercial banks also increases.
b) Cost of credit increases in the money market.
c) Demand for bank loans decreases.
d) Due to demand for goods will also decreases, inflation can be controlled.
e) All the above

3. If RBI wants to raise credit supply in the money market ......
a) RBI provide special schemes and gifts to promote more loans in market.
b) RBI decreases the bank rate.
c) RBI lend more money to banks.
d) RBI increases the bank rate.
e) None of these

4. Who acts as a custodian of cash reserves of scheduled banks ......
a) Reserve Bank of India
b) State Bank of India
c) Central Bank of India
d) Central Government of India
e) None of these

5. When does banks need to maintain mandatory reserve ratio?
a) Quarterly
b) Yearly (Financial)
c) Half yearly
d) At any given point of time
e) None of these

6. What is the rate charged by banks for discounting of approved bill of exchange?
a) Repo Rate
b) Reverse Repo Rate
c) Bank Rate
d) All the above
e) None of these

7. If RBI manipulate the Bank Rate then .......
a) Increase in supply of credit in economy.
b) Decrease in supply of credit in economy
c) Advance loans are stopped.
d) Either increase or decrease in the credit supply in economy.
e) Neither increase nor decrease in supply of credit in economy.

8. To arrest the rise in the price levels during inflation .......
a) RBI reduces the Bank Rate
b) RBI raises the Bank Rate
c) RBI manipulate the Bank Rate
d) All the above
e) None of these

9. Why does RBI need to change CRR or SLR?
a) To show that it is the supreme power for monetary system in India
b) To have grip over banking system
c) Depends upon the monetary requirements and conditions of the economy
d) Because corporate and big companies need more money to expand their business
e) All the above

10. Liquidity Adjustment Facility (LAF) mean .....
a) Advancing loans to banks in adjusting day to day mismatches in the liquidity.
b) Facilitates banks credit expansion.
c) Unsecured money market facility.
d) Maintaining the liquidity in the form of gold, cash and government securities.
e) None of these

11. Repo and Reverse Repo operations are .....
a) Reduction of excess of expenditure
b) Variable reserve ratio operations
c) Issuing and paying agent operations
d) Liquidity adjustment facility operations
e) None of these

12. When do banks get money at cheaper rate?
a) When CRR is increased
b) When Repo is lowered
c) When Reverse Repo is lowered
d) When SLR is lowered
e) None of these

13. Pulling out excess money from banks means .........
a) Raising CRR
b) Raising LAF
c) Reducing CRR
d) Reducing SLR
e) Keeping Variable Reserve Ratios unchanged

14. The rate of interest that RBI charge on banks for long term lending is .......
a) Repo Rate
b) Bank Rate
c) Reverse Repo Rate
d) Base Rate
e) None of these

15. Money available cheaper from RBI means .........
a) Bank rate is low when compared to previous bi monthly monetary policy
b) Repo Rate is low when compared to previous bi monthly monetary policy
c) Reverse repo rate is unchanged when compared to previous bi monthly monetary policy
d) Both a and b
e) None of these

16. When can RBI sell more government securities to banks?
a) When RBI increases the SLR
b) When RBI decreases the SLR
c) When RBI increases the CRR
d) When RBI decreases the CRR
e) None of these

17. Regional Rural Banks (RRBs) need to maintain their complete SLR in .......
a) Gold and cash
b) Loans and advances to rural poor
c) Government and other approved Securities
d) They need not maintain as sponsor bank maintains the SLR
e) None of these

18. Reverse Repo Rate is an instrument used by RBI in order to ........
a) Pull out excess liquidity in the economy.
b) Maintain liquidity at a certain level.
c) Increase the liquidity levels in the economy.
d) Decrease the liquidity in the banking system.
e) None of these

19. Identify the false statement from the following.
a) When RBI sells government securities to banks the main purpose of selling may be to raise more funds for banks.
b) When RBI buys the government securities from banks the main purpose of buying may be to pull out excess money from banks.
c) When RBI sells government securities to banks it is raising funds to governments in the form of borrowing.
d) When RBI repurchasing government securities for a short period from banks it is pumping more funds in the banking system.
e) None of these

20. Repurchasing the government securities means .......
a) RBI is lending to banks
b) Banks are lending to RBI
c) Government is lending to banks
d) RBI is lending to government
e) None of these

21. In RBI’s monetary policy, Liberal Money Policy means .......
a) Banks no need to deposit more excess cash as reserves.
b) Banks are asked for more and more deposits to be held with RBI.
c) CRR is Decreased
d) Both a and c
e) None of these

22. RBI’s fifth bi-monthly monetary policy statement of 2014-15 is/ was scheduled on .....
a) 30th Sep, 2014
b) 2nd Jan, 2014
c) 2nd Dec, 2014
d) 5th Aug, 2014
e) None of these

1-d, 2-e, 3-b, 4-a, 5-d, 6-c, 7-d, 8-b, 9-c, 10-a
11-d, 12-b, 13-a, 14-b, 15-d, 16-a, 17-c, 18-b, 19-e, 20-a, 21-d, 22-c

Monday, 6 October 2014

Secondary Services of Banks

Remitting money from one bank branch to another bank branch or its own bank branches is called Remittances. This can be done through various means like NEFT, RTGS, Demand Draft, Bankers'
Cheque. In olden days banks used to remit money through Mail Transfer (MT), Telegraphic Transfer (TT) etc. For international transactions banks use Outward Remittance and Travelers' Cheque (TC).

National Electronic Funds Transfer (NEFT): 
This system was introduced by RBI in order to transfer funds within the banking system through electronic format. Under this system, an individual or a business entity can transfer funds from a paisa to any amount as it has no upper limit. This is a reliable, secure, efficient and economical system of funds transfer and clearing in banking system. A service charge is collected per transaction form the customer.

Real Time Gross Settlement System (RTGS): 
This is also an Electronic Fund Transfer System like NEFT. But an important difference is seen in settlement. This is settled on gross basis at real time. Each and every remittance transaction will be settled individually. These transactions are irrevocable. Each participating bank need to open an account with RBI for settlement of funds. The settlement is done to the banks' account with RBI on individual transaction basis. For both NEFT and RTGS, we need have IFSC code of beneficiary in order to remit the funds.

Bankers' Cheque (BC) and Demand Draft (DD): 
This is also an oldest method of fund transfer with confirmed and secure way of transfer of funds. These are the document based negotiable instruments used to transfer funds. An applicant needs to purchase a bankers cheque or demand draft from a bank in order to pay the payee on the same bank's different branch.

★ Bankers' Cheque is issued on its own branch where as demand draft is issued on other branches. Bankers' cheque is also called as pay order. The life of the BC is of three months from the date of issue and the life of DD is six months from the date of issue. And it can be revalidated.

★ BC and DD can be purchased across the counters through cash but as per RBI anti money laundering and income tax provisions Rs.50000 and above need to be routed through bank account only. Commission is the income generation from DD and BC / PO to Banks. These types of services are being used less now a days due to introduction of online payment system.

Banking Knowledge Practice Questions

1. Where is the head office of Syndicate Bank located?
a) Bangalore
b) Manipal
c) New Delhi
d) Mumbai
e) Kolkata

2. NABARD support lending to farmers, rural artisans and other non farmers in rural areas through ......
a) Co-operative Banks
b) Regional Rural Banks
c) Land Development Banks
d) Scheduled Commercial Banks
e) All the Above

3. Identify the macro economic policy/ policies of India .......
a) Monetary policy
b) Fiscal policy
c) Regulatory policy
d) Only a and b
e) None of these

4. RBI uses bank rate in order to control .......
a) Money supply, volume of bank credit and cost of bank credit.
b) Liquidity
c) Cash holdings of banks
d) Financial position of banks
e) None of these

5. What are the steps taken by RBI, in order to meet demand and time liabilities of banks in time?
a) Banks are asked to keep mandatory regulatory cash reserve with RBI
b) Banks are asked to maintain CRR
c) Both a and b as they are same
d) Banks are asked to keep enough cash in cash counters
e) None of these

6. India's own payment gate way 'RuPay' works in which of the following channel/s?
a) Automated Teller Machines
b) Point of Sales
c) Online Sales
d) All of the Above
e) None of these

7. Monetary policy is used by RBI for controlling.......
a) Inflation or deflation
b) Exports or imports
c) Indian rupee or foreign currency
d) State or Central Government
e) None of these

8. Identify the difference between commercial paper and certificate of deposit ........
a) Certificate of deposit is issued at discount while commercial paper at face value
b) Certificate of deposit is a financial instrument while commercial paper is a financial statement
c) Certificate of deposit is issued by banks while commercial paper is issued by firms or public limited companies
d) All the above
e) None of these

9. When does money market is called as 'Tight'?
a) When the call money rate is low
b) When the call money rate is high
c) When money availability in the market is very high
d) When participants in the money market are ready to lend
e) None of these

10. If a bank needs to attract Provident Fund Deposits, what are the criteria that banks must possess?
a) Profitability in preceding 3 years
b) Minimum of Rs.200 crores as net worth
c) Capital adequacy of 9%
d) All the above
e) None of these

11. If the stock markets are declining then it is called as .......
a) Bull run
b) Down run
c) Bear run
d) Stage
e) None of these

12. A promissory note that is not secured by any collateral or not secured by a mortgage or lien marked on any property is ....... instrument.
a) Debenture
b) Bill of exchange
c) Commercial bill
d) Currency bill
e) None of these

13. What does RBI do if a Re.1 note is issued by Government of India?
a) RBI abject the issuance
b) RBI put into circulation
c) RBI converts Re.1 in to higher denomination of Rs.10 and more.
d) RBI asks banks to not to support for circulation
e) None of these

14. RBI issue currency rupee notes on bases of ........
a) By holding minimum value of gold coins and bullion
b) By holding minimum foreign securities as a part of the total approved assets
c) By holding minimum amount of commodities which are trading in commodity exchanges
d) Only a and b
e) All the above

15. Which of the following entities are applicable for the new listing obligations and disclosure requirements of SEBI regulations, 2014?
a) Listing of debentures
b) Listing of bonds
c) All listed companies
d) All the above
e) None of these

16. National Payments Corporation of India (NPCI) is being used by banks for ......
a) Remittance
b) Clearing and settlement
c) Payments and settlements
d) Advisory service
e) None of these

17. NOSTRO account means .......
a) An account opened by foreign citizens other than NRIs in India with Indian banks in INR for their expenses in India.
b) An account opened by foreign citizens other than NRIs in India with foreign banks in foreign currency to convert Indian rupee to that currency and remit back to their own country.
c) An account opened by an Indian bank in the foreign countries in their banks and in that country currency for settlement in that country's currency.
d) An account opened by a foreign bank in India with their corresponding banks in INR for settlements in INR.
e) None of these

18. What kind of Treasury Bills (T-Bills) is/ are issued by State Government?
a) No Treasury Bills issued by State Government
b) 182 - days
c) 91 - days
d) 364 - days
e) None of these

19. Pick the odd one out from the following about Bharat Bill Payment System (BBPS).
a) BBPS is a unified bill payment system across the country.
b) It will be setting up the standards in operations related to payments, clearance, and settlements.
c) G. Padmanabhan committee had provided a report on feasibility of Bharat Bill Payment System (BBPS).
d) Payment gateways, service providers, banks, and agents will be participants in this system.
e) None of these

20. Electronic fund transfers like RTGS and NEFT are operated and maintained by ......
a) National Payments Corporation of India (NPCI)
b) Bharat Bill Payment System (BBPS)
c) Reserve Bank of India (RBI)
d) Clearing Corporation of India Limited (CCIL)
e) None of these

21. Identify the Basel III norms from following that, recently RBI has extended the timeline for implementation for banks in India ........
a) Minimum regulatory capital requirement
b) Market discipline
c) Holding the minimum capital to risk weighted assets ratio to 10.25%
d) Leverage ratio to 3%
e) All the above

22. Identify the odd one out from the following benefits of RTGS.
a) Settlement is immediate
b) Suited for only lower value transactions
c) Lowers the settlement risk
d) Avoids credit risk while settlement
e) Settled at real time

23. Who all can hire a locker in a bank?
a) Individuals
b) Limited companies and societies
c) Specified associations
d) Two persons jointly
e) All the above

24. Expand IFSC ........
a) Indian Financial System Code
b) Indian Financial Services Code
c) International Financial Service Code
d) Interbank Fund Service Code
e) Indian Financial Security Code

25. Which among the following is known as pre paid negotiable instrument?
a) Cheque
b) Promissory note
c) Bankers cheque/ Pay order
d) Fixed deposit
e) None of these

1-b, 2-e, 3-d, 4-a, 5-c, 6-d, 7-a, 8-d, 9-b, 10-d
11-c, 12-a, 13-b, 14-d, 15-d, 16-b, 17-c, 18-a, 19-e, 20-c
21-e, 22-b, 23-e, 24-a, 25-c

Sunday, 28 September 2014

FDI Limits

List of Limits in Various Sectors (In %)
1. Defence Raised to 49% from 26%
2. Pension - 49%
3. Insurance - 49%
4. Print Media - 26%
5. Civil Aviation - 49%
6. Public Sec. Banks - 20%
7. Private Sec. Banks - 74%
8. Multi Brand - 51%
9. Single Brand - 100%
10. Tourism - 100%

Tuesday, 23 September 2014


1. Which of the following commissions recommended for establishment of Reserve Bank of India?
a) Deshmukh Committee
b) Hilton young commission
c) Presidency Banking Commission
d) Narasimhan Committee
e) Osbone Smith Committee

2. RBI has capped the _______ to Rs. 35000 Crore to central government for the first half of the new financial year 2015.
a) Bridge Loan
b) Long term loan to repay the World Bank loan
c) Ways and means advance
d) Advance to promote Government Schemes
e) Advance for improving infrastructure for the newly formed states in India

3. RBI has been authorised by Central Government to issue debt instruments not exceeding Rs.50000 Crore during the fiscal 2014-15 under MSS. What do you mean by MSS?
a) Marginal Stability Scheme
b) Market standardisation Scheme
c) Market Stabilisation Scheme
d) Marginal Stabilisation scheme
e) None of the above

4. Which bank has started issuing Kisan Card to withdraw one lakh per day from ATMs?
a) Axis Bank
b) ICICI Bank
c) HDFC Bank
d) State Bank of India
e) Punjab National Bank

5. Who is recently named as the India's governor on the board of governors of Asian Development Bank?
a) Sushma Swaraj
b) Arun Jaitley
c) Murali Manohar Joshi
d) H.R.Khan
e) Venkaiah Naidu

6. The rate of interest on Differential Rate of Interest (DRI) loan introduced in the year 1972 is __
a) 4%
b) 5%
c) 6%
d) 3%
e) Depends on the loan

7. Which of the following banks were merged with State Bank of India?
a) State Bank of Indore
b) State Bank of Sourasthra
c) State Bank of Bikaner and Jaipur
d) State Bank of Patiala
e) a & b

8. When a person wants to save money for a longer period of time with a view to earn a higher rate of interest, he/ she should open which of the following types of accounts?
a) Savings account
b) Current account
c) Terms Deposit account
d) Recurring account
e) None of these

9. For obtaining which among the following, does a customer not require a bank account?
a) A Loan
b) A Cheque
c) A Banker's Draft
d) A debit Card
e) All of the above

10. When RBI sells Government securities, its result:
a) The liquidity in the banking system increases
b) The liquidity in the banking system remains unchanged
c) The liquidity in the banking system gets diminished
d) The Deflation will be controlled
e) The borrowers get credit at cheaper rate

11. The banks are in process to bring in biometric ATMs. These are specially aimed to address the needs of which of the following categories?
a) Urban customers
b) Rural customers
c) Students
d) Women
e) None of these

12. What do you mean by flight of capital?
a) Large number of investors of a country transferring their investments elsewhere due to disturbed economic conditions
b) Investment in risky projects
c) Large amount of inflow of capital from NRIs
d) b & c
e) None of the above

13. Fourteen banks were nationalised on 19.07.1969 as per:
a) Companies Act 1956
b) Banking Regulation Act 1949
c) Banking Companies (Acquisition and transfer of undertakings) ordinance Act, 1969
d) RBI Act 1934
e) Negotiable Instruments Act 1881

14. Under PMJDY, every account holder will get a ____
a) Rupay debit card
b) Rs. 1.00 lack accident insurance
c) Rs. 30,000 for natural death
d) Rs. 25000 credit card limit
e) a, b & c

15. The Phase II of PMJDY (15th August, 2015 to 14th August, 2018) covers ____
a) Creation of Credit Guarantee Fund for coverage of defaults in overdraft A/Cs
b) Micro Insurance
c) Unorganized sector Pension schemes like Swavlamban
d) Only a & b
e) a, b & c

16. How many times nomination in deposit accounts can be changed?
a) Only one
b) Maximum two times
c) Once in a year
d) At the discretion of the concerned bank
e) No such restriction

17. BIS which has representative offices in Hong Kong and Mexico was established on 17th May 1930, wherein BIS stands for:
a) Bank for Industrial Settlements
b) Bank for International Settlements
c) Bank with Industrial standards
d) Bureau of Indian Standards
e) None of the above

18. Which Indian is one of the Board of Directors in BIS (Bank for International Settlements)?
a) Arun Jaitley
b) Chidambaram
c) Raghuram Rajan
d) Arundhathi subramanyam
e) SS Mundra

19. Basel III Norms are to be fully implemented by ____
a) 31 march 2020
b) 31 March 2019
c) 31 March 2025
d) 30 September 2014
e) None of these

20. What are the powers of RBI under section 35A of the Banking Regulation Act 1949 for issuing directions to Bank?
a) To issue directions in the public interest or in the interest of banking policy
b) To prevent affairs of banking company if it is detrimental to the interests of depositors
c) To secure the proper management of any banking company
d) All the above
e) Only a & b

21. As per Basel III, Banks would be required to maintain capital Adequacy Ratio of ____ including Capital Conservation Buffer (CCB).
a) 11.5
b) 10.5
c) 9.5
d) 8.5
e) 12.5

22. SEBI Head Office is located in:
a) Hyderabad
b) Pune
c) Mumbai
d) New Delhi
e) Chennai

23. Which of the following are the targets for different categories of priority sector?
a) Overall target 40% of net Bank credit
b) Agriculture loans (direct and indirect) 18%
c) Priority sector target for foreign Banks is 32%
d) All the above
e) None of the above

24. In terms of section 19 of the RBI Act 1934, the RBI has been prohibited from:
a) Acting as lender of last resort to banks
b) Drawing or accepting bills payable otherwise than on demand
c) Allowing interest on deposits or current accounts
d) Deciding Repo and Reverse Repo Rates
e) Deciding Bank Rate

25. Budget allocation for the rural housing scheme in the Union Budget 2014 - 15 is ____
a) Rs. 6,000 cr
b) Rs. 8,000 cr
c) Rs. 10,000 cr
d) Rs. 12,000 cr
e) None of the above

26. RBI allocating the funds from the subvention of rate of interest to Bank loans given to farmers by pledging their gold comes under _____
a) Traditional function
b) Supervisory function
c) Promotional function
d) Derilictory function
e) None of these

27. Review of banks performance is one of the functions of ____
a) Promotional function
b) Administrative function
c) Supervisory functions
d) Negative functions
e) None

28. AS per RBI order, against the certificate of Deposit, the ____
a) Loan cannot be granted
b) Loan can be granted
c) Loan can be granted up to 50% of value
d) Loan can be granted up to 75% of value
e) None of these

29. An order cheque is endorsed as "without recourse to me" by the endorser. This endorsement is known as
a) Blank endorsement
b) Restrictive endorsement
c) Endorsement in full
d) Sans recourse endorsement
e) None of these

30. Bank A allows one of its clients to withdraw against clearing of a cheque, The banker is called as:
a) Collecting and paying banker
b) Holder in due course
c) Holder for value
d) Reimbursement banker
e) Any of the above

31. Which one of the Non Resident Deposit schemes is not permitted?
a) FCNR A/cs
b) NRNR A/cs
c) NRE A/cs
d) NRO A/cs
e) NREO A/cs

32. Capital adequacy is worked out based on:
a) Total demand and time liabilities
b) Net demand and time assets
c) Risk weighted assets
d) Risk weighted liabilities
e) Only a & b

33. The whole time Directors of a Bank are appointed by:
a) Reserve Bank of India
b) Central government in consultation with RBI
c) Individual Bank
d) All the above
e) None of the above

34. Maximum amount that can be referred to Banking Ombudsman is ___
a) Rs. 5 lakh
b) Rs. 10.00 lakh
c) Rs. 4.00 lakh
d) Rs. 3.00 lakh
e) Rs. 2.00 lakh

35. Which of the following is the first universal bank of India?
b) Axis Bank
d) Federal Bank
e) None of these

36. Which of the following guidelines are applicable in connection with short fall in lending to priority sector?
a) Equivalent amount of shortfall under agriculture sector should be invested with RIDF
b) Any shortfall in achieving sub-target under SSI sector, an equivalent amount should be invested with SIDBI
c) The interest rates on banks' contribution to RIDF shall be fixed by Reserve Bank of India from Time to time.
d) The foreign banks having shortfall in lending to stipulated priority sector target/ subtargets will Be required to contribute to Small Enterprises Development Fund (SEDF)
e) All of the above

1) b; 2) c; 3) c; 4) a; 5) b; 6) a; 7) e; 8) c; 9) c; 10) c;
11) b; 12) a; 13) c; 14) e; 15) e; 16) e; 17) b; 18) c; 19) b; 20) d;
21) a; 22) c; 23) d; 24) c; 25) b; 26) c; 27) c; 28) a; 29) d; 30) c;
31) b; 32) c; 33) b; 34) b; 35) c; 36) e.

Sunday, 21 September 2014

Bank advances and loans

Lending business is a risky activity. As banks' main function is lending, they must follow certain principles in order to protect their funds. The basic principles that banks follow while lending are....

1. Safety: 
Banks need to consider the borrowers' capacity to pay, willingness to pay, and income generation of the person or business entity. This is a safety check that banks need to consider while lending.

2. Liquidity: 
Lent amount is to be paid in proper repayment schedules and inflow towards the loan or advance must be proper in order to fulfill the demand of their depositors.

3. Profitability: 
The activity of lending is done in order to make some profit out of it.

4. Purpose: 
The loans must be grant for some income generation purpose and not for speculation or some anti social activity. The purpose must be genuine.

5. Diversification of risk: 
Banks need to diversify their risk by lending to different type, sectors and areas of businesses.

6. Security: 
Security on the loan is the primary criteria for the bank. All secure loans are safe and can be recovered even the borrower is a defaulter.

Different types of lending....
Banks lend money in different ways. NThese are classified into following categories:

★ Fund based advances: 
Fund based advances are those where the bank give money as loan or advance. These are for business entities and individuals. These are like term loans and working capital loans. Those may be secure or unsecure loans.

★ Working capital loans: 
These are generally unsecure loans but vary from bank to bank and borrower to borrower. This is a type of loan taken to meet day to day cash requirement of the business entities. Requirements like purchase of raw material, payment of wages, payments to vendors etc.,. As said the criteria differ in lending, the documentation and securities also differ, where the loan will not have a fixed amount, or fixed intervals, or fixed period or fixed schedule for repayment. The best example is Overdraft (OD).

★ Term loans: 
As the word 'term' denotes period these loans have to be paid back in a fixed period and fixed schedule. For these loans the rate of interest will be fixed as well as payment period and payment amount (like EMIs). These loans may be secure or unsecure loans and rate of interest varies for both, as rate of interest will be lower to secure loans compared with unsecure loans.
The best examples are: business loans, vehicle loans, jewellery loans. These are secure loans. And personal loan, credit cards etc are unsecure loans.

★ Secure loans: 
These are loans that are granted on basis of certain security against it as collateral. If the borrower defaults in payment of the loan the security will be used for repayment. Security may be land, house, factory, jewellry, vehicle, shares, life insurance policies, fixed deposits etc.

★ Unsecure loans: 
These loans are granted by banks without any security against it. Banks may be at high risk in these cases. The examples are loans like credit cards, personal loans, overdraft etc.


1. What are the measures taken by RBI to reduce liquidity in the banking system?
a) RBI increases the CRR.
b) RBI increases the SLR
c) RBI increases the repo rate.
d) RBI increases the bank rate.
e) All the above

2. LAF stands for .......
a) Loan Adjustment Fund
b) Liquidity Adjustment Facility
c) Long Awaited Funds
d) Loan Against Funds
e) None of these

3. Open market operations, one of the measures taken by RBI in order to control credit expansion in the economy, means ........
a) Sale or purchase of govt. securities
b) Issuance of different types of bonds
c) Auction of gold
d) To make available the direct finance to borrowers
e) None of these

4. Truncation of cheques means .........
a) The cheques in the paper form will be retained by the collecting banker and he will submit only photograph image of cheque to the clearing house.
b) A trunk call will be booked by banks to the payee bank and requests them to clear the cheque.
c) Cheques will be scanned and the electronic image, instead of physical cheque, will be transmitted in the clearing cycle.
d) Debiting the drawers account through internet banking.
e) None of these

5. Which of the following institution plays a major role in promotion of cross border trade and investment?
c) NHB
d) EXIM Bank
e) None of these

6. Forged cheque means ........
a) The cheque which is post dated cheque
b) The cheque in which the signature of the drawer of the cheque is not genuine.
c) A stale cheque
d) All of the above
e) None of these

7. Amalgamation of Regional Rural Banks is recommended by?
a) K.C. Chakravarthy Committee
b) Usha Thorat Committee
c) Vyas Committee
d) C.V. Anand Bose Committee
e) None of these

8. Which of the following loan products is also known as 'teaser loans'?
a) Working capital loan
b) Education loans
c) Jewel loans
d) Home loans
e) Consumer durable products loans

9. Lending to customers with less than ideal credit status is known as?
a) sub-prime lending
b) Banks don't lend
c) Ideal credit lending
d) Risky lending
e) None of these

10. Expand NPA in the context of loan products?
a) Non-performing assets
b) New product ascendant
c) Net performing assets
d) Net profit on assets
e) None of these

11. Loan period or term of loan in case of repo is ........
a) Greaterthan 365 days
b) Lessthan 30 days
c) Greaterthan 30 days
d) No limit in case of term in repo
e) None of these

12. Identify lending institution from the following .......
a) Exports and Imports Bank (EXIM Bank)
b) Small Industries Development Bank of India (SIDBI)
c) Housing Development Finance Corporation (HDFC)
d) All the above
e) None of these

13. Advancing term loan or cash credit or working capital requirements is known as ......
a) Retail lending
b) Corporate financing
c) Multilateral lending
d) Company financing
e) None of these

14. EXIM Bank's Line of credit preclude ...... for Indian exporters.
a) Credit risk
b) Legal Risk
c) Systemic Risk and settlement Risk
d) Market Risk
e) None of these

15. Money with the public and money with banks in form demand deposits and money with RBI in other deposits is known as?
a) Narrow banking money or M2
b) Narrow Money or M1
c) Broad money or M3
d) High powered money or M0
e) None

16. The concept of classifying banks into weak banks and permitting them to invest only in
government securities is known as?
a) Narrow Banking concept
b) Tarapore and Narasimham concept
c) Banking investment concept
d) Four-tire banking concept
e) None

17. Automatically converting amount from savings bank account into fixed deposit, beyond a fixed limit, set as per the customer's request is known as .......
a) Re-investment deposit
b) Demand Term deposit
c) Flexi deposit
d) Recurring deposit
e) None of these

18. What are loans and advances provided by banks to meet working capital requirements
of a business entity?
a) Overdraft
b) Cash credit
c) Purchase and discounting of bills
d) Loans
e) All the above

19. As per RBI guidelines what percentage does Indian banks must lend to Priority Sector?
a) 40%
b) 32%
c) More than 50%
d) 18%
e) As per the individual bank's capacity

20. Exchange Earner's Foreign Currency (EEFC) account .....
a) It is a current account so no interest is paid to the deposits in the account
b) Account deposits are not in Indian Rupee
c) This account can be opened by all categories of foreign exchange earners but resident in India
d) The amount have to be convert into Indian rupee before a month
e) All the above

21. Which of the following credit rating institutions is promoted by RBI along with SBI, HDFC Bank and ICICI Bank?
d) CRO
e) None of these

22. Identify the odd one from the following. While lending banks will follow certain cardinal principle, those are ........
a) Safety and Security
b) Liquidity and Profitability
c) Purpose
d) Diversification of risk
e) None

23. What are methods used to estimate the working capital needs?
a) Operating cycle
b) Turn over projection
c) Net working capital projection
d) All the above
e) None of these

24. What is the mode of charges laid on vehicle loan?
a) Pledge
b) Hypothecation
c) Assignment
d) Mortgage
e) All the above

25. Generally banks face a credit risk when ....
a) Customer defaulting to repay the loan
b) Banks lend money to RBI
c) Banks lend money to government
d) Credit given to the customer
e) All the above

26. Identify the odd out of following with respect to priority sector ......
a) Agriculture
b) Education
c) Housing
d) Consumer durable credit
e) Export Credit

27. What is the percent of advances does Khadi and Village Industries Sector (KVI) must be lent by banks in the SME and MSME category of Priority Sector advancing?
a) More than 50% SME and MSME category
b) 60% of total Priority Sector advances
c) 60% of SME and MSME category
d) Less than 40% SME and MSME category
e) None of these

28. As per present RBI guidelines what is minimum percentage does commercial banks need to lend Government?
a) 22%
b) 4%
c) 9%
d) 8%
e) No need to lend

29. A reduction in SLR rate leads to .......
a) Gold rate decrease
b) Support the credit growth in India.
c) Government will be funded more as the rate is reduced.
d) Reduction in credit growth in India
e) None of these

1-a, 2-b, 3-a, 4-c, 5-d, 6-b, 7-c, 8-d, 9-a, 10-a
11-c, 12-d, 13-b, 14-a, 15-b, 16-a, 17-c, 18-e, 19-a, 20-e
21-b, 22-e, 23-d, 24-b, 25-a, 26-d, 27-c, 28-a, 29-b.