The Tip of Indian Banking Part II

THE TIP OF INDIAN BANKING PART IIWhat do you mean by real investment trusts?

A real estate investment trust is very similar to a mutual fund. It invests in real estate properties, passing on the income and/or profits to the investors. They are very popular real investment vehicles in some of the developed countries and also

very liquid. In our country, the government and the regulators are still trying to put in place the right

structure with the right tax treatment that is best suited to the investors. There are several types of real estate investment trusts namely – equity, mortgage and

hybrid. Equity real estate investment trusts invest in real estate projects and take a stake in those

properties. The returns after the close of the projects are passed on to the investors. Mortgage real estate investment trusts invest in real estate properties that generate rental

income and pass on the money to the investors. Hybrid real estate investment trusts as the name suggests invest part of their money in real

estate projects and take a stake and the other part in income yielding projects like mortgage real estate investment trusts

What do you mean by fiscal deficit?

One of the most talked about figure in each budget is the amount relating to fiscal deficit which is expressed as a percentage of the gross domestic product.

If it is too high, say above 4.5% of the gross domestic product or more, it becomes a cause for concern for the government.

On the other hand, if it is contained well within the budgeted level, the finance minister is appreciated.

Fiscal deficit is the difference between a government’s revenues and expenditure for particular year.

If the two do not match and expenses are more than the earnings, the government usually borrows money to bridge this shortfall.

Higher government spending, lower revenue earnings and higher inflation leading to higher interest outgo could lead to fiscal deficit.

Higher deficit number could mean the government is spending more, earning less or it is a combination of the two.

Higher level of spending by the government can also lead to higher inflation thus leading to even a higher fiscal deficit figure in subsequent years.

A large deficit number means either the government or the economy is not performing properly and is an indication of troubles ahead.

What do you mean by growth investing?

Growth investing is where the investor buys the stock of a company expecting that the company will grow at a rate which will be higher than the rate of growth of the market as a whole or the sector to which the company belongs to

Since the company grows at a higher rate than the market’s rate, the stock will appreciate at a faster rate than the market benchmark.

Often, growth investing is perceived to be opposite or very different from value investing, but two very famous investors – Warran Buffett and Peter Lynch – believe the two styles could be mixed for great results.

Lynch who over a twenty year period as a fund manager of Fidelity’s Magellan Fund gave an annual average return of 29%, the best by any fund over such a long period of time, had followed an investment philosophy of growth at reasonable price – GARP

This investment philosophy mixed both value and growth styles of investing and made Magellan one of the best schemes in the history of mutual funds

What do you mean by capital asset pricing model?

Capital asset pricing model is a mathematical model used to price risky assets like stocks through a relationship between risk associated with such assets and the return that could be expected by the buyer of that asset.

The basic idea behind CAPM is that a buyer of a risky asset should be compensated by the risk he/she is taking.

This compensation is done through two ways – time value of money and the risk involved Time value of money is defined by the risk free return that the investor could get if the

same amount of money is invested in a risk free security like government bonds over the same period of time for which he is investing in a risky asset

Here, the risk is measured by an element called beta which is the extra amount of money that the investor could get for taking an additional risks

What are the investments for the purpose of saving tax?

At present an individual can get an income tax rebate upto Rs. 1.50 lakhs provided he invests the entire amount in specific schemes like public provident fund, mediclaim policy, life insurance policy, national savings certificate or to the extent of amount spent for payment of tuition fees to children

There are people who think about investments from the perspective of savings tax; however, in reality it is not the right approach

Saving tax can be one of the objectives; however not the main objective Often, it is seen that with tax saving being main objective, people miss out on investment

opportunities which can offer one better post-tax returns than the tax saving instruments one invests into.

At the time of investing funds in certain investments, it is better to give an importance to post tax returns rather than not on the perspective of investing to save tax.

What do you mean by stop loss?

Stop loss is considered to be the tool of the stock market trader to minimize the losses. At times, even the investors use this tool to great use.

An investor who is having a stock at Rs. 100/- can instruct his broker or system to sell the entire stock when the price of the stock touches to Rs. 95/-

By means of this activity, the investor is not gaining any profit; however, he minimizes his loss.

What do you mean by inflation indexation?

Inflation indexation is called as indexation in finance. It points to a process where the terminal value of an investment is adjusted for the rate of inflation.

When it comes to mutual funds, debt schemes enjoy indexation benefits and thus the incidence of tax on the final value of a debt fund could be adjusted to pay lower tax.

Equity funds on the other hand, enjoy full tax exemption for investments of more than one year and hence no indexation benefit kicks in here.

There is a myth about the balanced funds namely – the balanced funds are always equally balanced between equity and debt.

Although ideally this should be the base, this is not always true. In India, most balanced funds have 65 percent invested in stocks and the balanced in debt.

This is because the income tax laws allow a scheme with 65 percent stocks to enjoy advantageous tax status compared to the ones with lower equity exposure.

What do you mean by fixed maturity plan?

Bank fixed deposits are one of the most popular investment vehicles in the country. The following is found to be one of the prime reasons for the popularity of the fixed deposit

scheme – Fixed deposit provide the investor guaranteed returns. When an investor invests an amount of Rs. 10000/- in a fixed deposit account for a period of

one year at 10% rate of interest, at the end of the year, the investor gets a definite amount of Rs. 11000/- including the principal amount.

Another reason for the popularity of the scheme is lack of knowledge about alternative and attractive investment schemes which are equally good and sometimes better than fixed deposits in some respect.

Fixed maturity plan is an attractive plan and it is a debt mutual fund with a fixed matured tenure that has gained popularity during the last two years after the rate of interest in the economy went up to keep pace with the rising rate of inflation.

FMP has a fixed maturity ranging from as little as fifteen days to several years and the popular maturity period is 365 days or little more.

When an investor starts investing his money in this scheme, despite the facts that they are listed, the exit options are very low.

The amount received through FMPs are invested in debt market instruments like treasury bills, bonds, government securities, money market instruments which have very short term fixed tenures.

FMPs provide capital protection along with appreciation, FMPs are available as open ended and closed ended. In India, most FMPs are closed ended schemes

The tenure of FMP directly depends on the maturity period of instruments where the funds are invested.

For example, when a 91 day FMP is invested in 95% in treasury bills, then the fund’ yield will be arrived at based on returns that those treasury bills generate during this period of time.

FMPs are also available as interval funds and in this case, the investors get exit opportunities at fixed intervals.

Interval funds are FMPs that have lock in periods of a quarter; half a year or a year with maturities on specific dates.

What do you mean by RBI Repo rate?

RBI repo rate refers to the rate at which banks can borrow money from Reserve Bank of India to meet their short term requirements for funds

Banks typically meet their funding needs from deposits. Repo is only a residuary facility. The demand for funds depends on the demand for loans from the banks

Repo rate is a benchmark rate set by the Reserve Bank of India and the rate signals the rates for all other lending and borrowing activities in the system.

Repo is short for repurchase, which refers to the structure of the transaction. Banks offer securities to Reserve Bank of India when they borrow and repurchase them back when returning the money so borrowed from Reserve Bank of India.

A fall in repo rate by 0.25% to 7.25% means that Reserve Bank of India has reduced its lending rates to banks. Banks in turn are expected to reduce their loan and deposit rates to their customer

What do you mean by the building blocks for any loan?

Loan amount: The amount sanctioned as a loan to the borrower or the limit permitted as overdraft depends upon the income generation of the borrower or the wealth of the borrower apart from the value of collaterals offered as securities for the loans granted to him by the banker.

Rate of interest: The lender’s charge depends upon the term of the loan, base rate, type of loan and the profile of the borrower. The rate of interest can be fixed or variable depending upon the choice of the borrower.

Tenure of the loan: Depending upon the income generation of the borrower, the tenure of the loan is fixed and the borrower has to repay the entire loan along with interest within the time permitted to him. The borrower, however, can prepay the entire loan earlier.

Processing fee: Non refundable charges for various processes such as assessing loan eligibility and evaluating the collateral

What are the reasons for which the cheques are returned by the bankers?

Bankers return the cheques on account of various reasons When the amount of the cheque is more than the free balance available in the drawer’s

bank account, the cheque is returned to the customer with the reason – “Insufficient funds” Sometimes the signature of the drawer on the cheque may not be matching with the

specimen signature lodged with the bank and in such cases the cheque is returned with the reason – “Drawer’s signature differs”.

The validity period of the cheque is three months and when the date of presentation of the cheque is beyond three months from the date of the cheque, the cheque is returned with the reason – “Stale cheque”

When the date of presentation of the cheque is even one day earlier to the date of the cheque, the banker returns the cheque with the reason – “Post dated cheque”

Normally alterations are not permitted on the face of the cheque. However, the drawer can authenticate the alteration if any, on the face of the cheque by means of additional signatures in the case of alterations done on name of the payee, amount written in words and/or in figures etc., In the abovementioned cases, the cheques are returned with the following reasons – “Alterations on the cheque require authentication by the drawer”

In the case of the orders from a court or government thereby freeing the account of the customer, the banker dishonours the cheque presented by any customer on behalf of the customer for the reason – “Account frozen as per court/government orders”

What do you mean by fee and fund based products?

A bank or NBFC offers two types of products namely – fee based and fund based. The proportion between the two impacts the amount of capital required and income earned.

Loans are fund based products. In order to lend an amount as a loan to a borrower, the bank or NBFC has to borrow money and ensure that the cost of borrowing is less than the cost of lending.

When it sells a mutual fund or insurance product, it earns a fee or commission for doing so. These are third party products which do not require the bank to fund them.

Fund based products are also subject to capital adequacy norms and tighter regulation for non performing assets.

The profit margins in the case of fee based products may be lower; however, since they do not require high capital investment, they are profitable. The existing infrastructure is usually extended to offer them.

What do you mean by an overdraft facility available from a commercial bank?

An overdraft facility is a credit agreement made with a bank that allows an accountholder to use or withdraw more money than what he has in his current account upto the approved limit.

The time period for which the overdraft limit is permitted depends upon the requirement of the customer. When a customer is in need of funds to meet the day to day expenses namely; wages payable to the workers, repairs and maintenance charges, cost of raw materials, tools and other implements etc., on account of the facts that he may not be in a position to receive the expected amount from his creditors immediately towards meeting the above expenses. Basing upon the request of the customer subject to his furnishing the required details, the bankers permit overdraft limit upto certain limit namely – one month requirement or two months’ requirements.

The line of credit is typically given based on the accountholder balances and as pre-sanctioned loans against assets such as bank fixed deposits, shares and bonds offered as collateral.

The sanctioned overdraft limit and the interest charged will vary based on the nature of the asset offered as collateral.

The overdraft facility works like a loan. Money can be withdrawn as and when required and the interest has to be paid only on the amount borrowed and only for the time for which it was borrowed.Establishing an overdraft facility with a bank can help individuals or small businesses with short term cash flow issues although the negative balance needs to be repaid within a month.What are the components of the capital structure of a limited company

?

BANK EXAMINATIONS – GENERAL ASPECTS

01. In respect of a limited company, the capital structure consists of authorized capital, issued capital, subscribed capital and paid up capital

02. Balance sheet reflects the financial position of a business unit at any point of time and itcontains the aggregate figures of assets and liabilities under various heads

03. The five “C”s of credit are called as – character, capacity, capital, conditions and collateral

04. Capital refers to the funds available to operate a business of which there are two primary considerations, the amount of equity capital the owners have invested in the business and how effectively the total capital including creditor capital is employed.

05. Reserves are classified into two types – revenue reserve and capital reserve06. Revenue reserves are held in several forms like general reserve, investment

allowance reserve, capital redemption reserve etc.07. Capital reserves arise out of gains which are not related to the business operations of the

company like fixed asset revaluation reserve and share premium reserve08. Revenue reserve is available for distribution of profits09. Capital reserves are not available for distribution as dividend among the share

holders10. Secured loans are borrowings made by the company by creating a specific charge on the

assets of the company namely; debentures11. Unsecured loans are borrowings made by the company for which no specific security is

furnished and the examples are fixed deposits, loans from promoters/directors, inter corporate deposits and unsecured loans from banks etc.

12. Sundry debtors represent the amount owed by the customers and they are reported less of allowance for bad debts

13. Prepaid expenses are expenses incurred for which services are yet to be received14. Cost of production represents the consumption of raw materials(including stores)

and spares, power and fuel, direct labour, repair and maintenance, other manufacturing expenses plus opening balance of stock in process and minus closing balance of stock in process

15. Cost of sales represents Cost of production plus opening stock of finished goods minus closing stock of finished goods

16. Operating profit represents – net sales minus cost of sales minus interest and selling, general and administrative expenses

17. Net profit before tax – operating profit plus other income minus other expenses18. Retained profit – net profit minus dividend paid/declared

19. Net sales – gross sales minus excise duty and returns20. Ratios present a profile of firm, its economic characteristics, competitive approach

and its unique operative, financial and investment characteristics21. Activity analysis evaluates revenue and output produced by the firm’s assets22. Liquidity analysis measures the adequacy of firm’s cash resources to meet its near

term cash obligations23. Profitability analysis measures income of the firm relative to its revenues and invested

capital24. Performance analysis examines the revenues and expenses of the firm, either to look at

cost structure or relating to sales performance to the amount of assets used in creating sales

25. ECS stands for – electronic clearing service26. Dr. R.B. Barman is associated with – cheque truncation27. IDRBT is – Institute for development and research in banking technology at

Hyderabad28. Infinet is the network of Reserve Bank of India29. NEFT stands for national electronic funds transfer30. Memory cannot be treated as part of the computer hardware31. The popular electronic payment products are – credit card, debit card, automated

teller machines and electronic clearing service32. The electronic process that makes simultaneous use of sound, video and text is

calledmultimedia33. The resolution of the computer screen is determined by – pixels34. The memory which is volatile in nature is called – RAM – random access memory35. OLTAS- Online tax accounting system pertains to collection of direct tax online36. Electronic cheque is a negotiable instrument37. ISP refers to – Internet service provider38. Computerisation of Indian Banking industry is the outcome of – Rengarajan committee39. “A high tech bank within a bank” was recommended by Vasudevan committee40. Infinet refers to Indian financial network41. Information technology has resulted in improved efficiency, innovative products,

effective delivery system and enhanced productivity42. Data mining techniques can be applied in – predicting future trends based on

information available, credit risk analysis, analyzing demographic information about the customers

43. A full duplex transmission is capable of – providing simultaneous two waycommunications

44. The terminal connection to server is known as client and/or node45. PIN refers to personal identification number stored in magnetic strip of the card46. MODEM does the following – modulates digital signals into analog and demodulates

analog signals into digital signals47. Under “core banking solution” system – branches are connected to a central host;

branch automation modules and delivery channels are incorporated and transactions are done centrally and through online

48. Some of the network equipments are – routers, switches and hubs49. The dedicated telephone connection provided to the branches for CBS connectivity is –

leased line connection50. The card capture at ATMs may be due to – hot listed card, expired card, card holder

timed out (failure to collect card within permissible time)51. After three invalid PIN retries at automated teller machines – the card status becomes

inactive and gets activated after 12 midnight52. NAP stands for – network aggregation point53. Skimming is – illegal act of capturing credit/ATM/debit card numbers and PIN by

certain devices/gadgets54. The domain name of internet banking website differs according to banks

55. PING refers to Packet Internet Groper used to check the connectivity between computers

56. The risks mitigated by the use of RTGS are systemic risk and settlement risk57. Under the Indian stamp act, stamping is required on – demand promissory note,

usance bill of exchange, letter of credit, bill of lading, debentures, transfer of LIC policy, proxy, receipt etc

58. In the case of demand bills – stamp duty is not payable59. Stamping on pronote should be cancelled – by affixing the full signature so that the

stamps cannot be used again60. When the agreements embossed with special adhesive stamps cannot be used, they are

to be surrendered to the stamp collector61. Any instrument executed by or on behalf of or in favour of the government isexempted

from stamp duty62. Stamp duty chargeable has been waived by the government in respect of usance bills in

the following cases – arising out of genuine trade transactions; which are payable not more than three months after date of signature and which are drawn on or in favour of commercial/cooperative banks/SIDBI

63. Stamp duty is determined by the state laws for – acknowledgment of debt, indemnity, EMT, registered mortgage, lease deed, agreement, sale deed etc.

64. An understamped agreement can be set right by – paying the penalty as prescribed by the appropriate authority

65. The non judicial stamp paper was purchased on 1.05.2012 from the stamp vendor and this has been used by the bank to record an agreement covering the transaction dated: 01.04.2012 and this is not a valid agreement.

66. In the case of doubt as to stamp duty on an instrument, when it should be adjudicated ?– it should be adjudicated prior to the document being executed or at latest within a period of one month from the execution thereof

67. Stamping on DPN should be cancelled by the executants68. Stamp duty is charged depending upon the place of execution and kind of document69. Pronote, usance bills and documents requiring stamping of value above 0.10 paise –even

if not adequately stamped at the time of execution can be admitted in case they are validated by payment of penalty with required stamp duty

70. When documents are executed at a place other than the advancing branch, stamp duty payable at the time of execution is – as applicable at the place of executing branch

71. Stamps in the pronote are affixed vertically one below the other but duly cancelled is – not improper stamping and is considered as valid

72. Non judicial stamp paper should be cancelled – by writing part of the document on the stamp paper duly signed by the executants

73. Transfer of shares to the bank’s name where it is the pledge of the shares – involves payment of nominal stamp duty only

74. The stamp duty on receipts payable for Rs. 5000 – no stamp duty is payable for receipts upto and inclusive of Rs. 5000.00 and only from Rs. 5001/- onwards stamp duty is payable

75. In view of the amendment, the bill of exchange and promissory notes not duly stamped can be revalidated – on payment of the due stamp duty along with penalty

76. While granting advances to a company with charge created on securities which require registration under section 125 or the companies act – the banker should ensure that there is no prior charge on the same securities by inspecting register of mortgages and charges at the office of the registrar of companies

77. Under section 125 of the companies act, a charge created by a joint stock company is required to be registered with – registrar of companies under whose jurisdiction company’s registered office is located

78. The charges required to be registered with the registrar of companies under section 125 of the companies act – charge on plant and machinery, hypothecation of stocks, furniture and fixtures, stores, spares, EMT, registered mortgage etc.

79. The board of directors of a company can exercise powers to borrow money in excess of the limit specified in section 293(1)(d) provided – such a resolution is passed in the general body of shareholders

80. An advance to a limited company does not require registration of charges with the registrar of companies if the advance is in the nature of – pledge of stocks

81. The execution of security documents by a limited company should be – by affixing common seal only if required by articles of association

82. The effect of non registration of charge within the time limit is that – the advance becomes an unsecured advance

83. The ceiling imposed by the companies act, 1956 for a public limited company to borrow from the banks under section 293 1) (d) is – paid up capital + free reserves

84. The resolution of a company to borrow from a bank must be passed by – the ordinary resolution in a board meeting

85. In the case of a company advance, the secured creditor can stand outside the winding up and satisfy his debt out of the property charged without proving his claim before the liquidator

86. The winding up order of a company is effective from – date of petition of winding up87. The secured creditor of a company can file a winding up petition despite the creditor

having security.88. In the case of partnership firm, mandate may be revoked by any partner89. Partnership is to be registered with registrar of firms before an advance is granted to

the customer90. When the partnership firm is not registered – the firm cannot sue others legally91. For the partnership firms where one or more of the partners are hindu undivided family

– no fresh finance shall be provided92. A mandate may not continue to be operative in cases of – death of agent, lunacy of

agent, insolvency of agent etc93. The term “power of attorney” refers to – an instrument by which one person acts on

behalf of another94. A minor can be admitted to a firm as a beneficiary95. When the customer hands over money to the bank for remittance, the relationship

between the customer and the banker is principal and agent96. For recovering the dues the bank can enforce the security by – selling movable

properties pledged to it after giving due notice97. The right of set off can be exercised only when the right to sue has not expired and it can

be exercised even for time barred debts98. Right of subrogation is the right available to a guarantor and not to an indemnifier99. The contract of insurance is a contract of indemnity100. The right of lien is not barred by limitation

Committees and working groups


COMMITTEES AND WORKING GROUPS

Working group headed by O P Sodhani NRI InvestmentsWorking group headed by Rashid Jilani Internal control and systems in banksShere committee Electronic fund transferSodhani committee Forex marketsI T Vaz Lending norms for working capitalJilani Working capital to parties by way of cash

credit – as supplemental source of finance

J V Shetty Consortium LendingGoswami Panel Industrial sickness and corporate

restructuringJanakiraman Irregularities in financial marketP R Nayak Small Scale IndustriesVaghul Money marketS A Dave Mutual fundsSNadkarni Trading in public sector bonds and units

of Mutual fundsDr Ojha Rural lendingKelkar Functioning and financial viability of

Regional Rural BanksA C Shah Financial companiesPendharkar Review of inspection system in banksGoiporia Customer service in banksGhosh Frauds and malpractices in banksNarasimhan Restructuring the banking systemKannan Syndicated form of lendingP R Khanna Non Banking Finance Companies –

supervisionBasel Capital adequacy ratioM S Verma Weak banksTalwar committee Weak banksMitra Committee Legal compliance – fraudsJanki Ballabh Fair Practices CodeTarapore Capital account convertibility

Recent committees and working groups


RECENT COMMITTEES AND WORKING GROUPS

Deepak Mohanty On Benchmark Prime Lending Rate - BPLRDeepak Mohanty Working group on surveysUsha Thorat High Level Committee to review Lead Bank SchemeP. Vijaya Bhaskar Rao To review business correspondent model

Usha Thorat On systems and procedures for currency distributionDr Rakesh Mohan and Tiff Macklem G20 working group enhancing sound regulation and

strengthening transparencyDr. Rakesh Mohan Committee on financial sector assessmentDr. C. Rengarajan On estimation of savings and investmentDr. Rakesh Mohan Committee on the global financlal system on Capital

Flows and Emerging Market EconomicsA K Bera Task force for diamond sectorProf Amitabh Kundu Technical advisory group on development of housing

start up index in IndiaG. Padmanabhan On cost of ICT solutions for Regional Rural BanksR. Gandhi On IT support for Urban Cooperative BanksG. Srinivasan On technology upgradation of Regional Rural BanksV K Sharma Interest rate futuresK C Chakrabarthy On rehabilitation of sick small and medium enterprisesDr Balwant Singh On seasonal movements in inflationC P Swarankar To examine procedures and processes of agricultural

loansK G Karmakar Task force on empowering Regional Rural Bank boards

for operational efficiencyS S Johi To suggest measures to assist distressed farmersK S R Rao Technical advisory group on development of leading

economic indicators for Indian economyR. B. Burman Technical advisory group on development of leading

economic indicators for Indian economyN D Jadhav Working group on compilation of state government

liabilitiesP K Pain Working group on cost of NRI remittancesN. Sadasivam Working group to formulate a scheme for ensuring

reasonableness of bank chargesM P Besbaruah Advisory committee on ways and means advances to

state governmentsSanal Kumar Velayutham Need and use behavior for small denomination coinsH R Khan Internal group to examine issues relating to Rural credit

and microfinanceAnand Sinha Working group to review export creditA V Sardesai Internal working group on Regional Rural BanksPrashant Saran Working group on ware house receipts and commodity

futuresR. Gandhi Working group on regulatory mechanism for cardsA. Vaidyanathan Tasks force on revival of cooperative credit institutionsG Srinivasan Special group for formulation of debt restructuring

mechanism for medium enterprisesR.M. Patil Working group on screen based trading in government

securitiesA. Vaidyanathan Expert group on internet deployment of central

database management system – CDBMSShyamala Gopinath Monitoring of financial conglomeratesN. Sadhasivan On development financial institutionsV S Vyas Advisory committee on flow of credit to agricultureA S Ganguly Working group on flow of credit to SSI sectorG. Padmanabhan Rupee interest rate derivatives

Usha Thorat Working group on instruments of sterilizationBarman On cheque truncation and E-chequesB. Mahapatra Working group on introduction of credit derivatives in

IndiaJaspal Bandra Working group on rupee derivativesA L Narasimhan Committee on computer auditR H Patil Committee on payment systemsG. Ramachandran Review group on working of the Local Area Bank

SchemeDeepak Mohanty Technical group on Statistics of International Trade in

ServicesM R Ramesh Working group for suggesting operational and

prudential guidelines on Stripes (Separately Traded Registered Interest and Principal of Securities)

Zarir J Cama Working group on electronic moneyS. R Iyer Working group to examine the Role of credit

Information bureaus in collection and dissemination of information on suit filed accounts and defaulters

R.B. Burman Information systems audit policy for the banking and financial sector

Vipin Malik On consolidated accounting and other quantitative methods to facilitate consolidated supervision

Y V Reddy Expert Committee to review the system of administered interest rates and other related issues

N.L. Mitra On legal aspects of bank fraudsC R Muralidharan Technical group on market integrityJagdish Kapoor Task force to study the cooperative system and

suggest measures for its strengtheningMadhav Rao High power committee on Urban Cooperative BanksN H Siddiqui Working group for setting up credit information bureau

in India

Whether signatures obtained in nominations forms are to be witnessed?

BANK EXAMINATIONS – GENERAL ASPECTS- PART:: 14

01. Signatures of the bank accountholders obtained in nomination forms DA1; DA2; DA3 need not be attested by witnesses.

02. In terms of banking companies (nomination) rules, 1985, the thumb impression of the accountholder obtained on nomination forms DA1, DA2, DA3 are required to be attested by two witnesses.

03. Nomination facility is available for joint deposit accounts also with or without either or survivor mandates opened by customers

04. The term Banking is defined in – Banking Regulation act, 194905. Reserve Bank of India is called as the regulator for the commercial banks in

the country06. A right of general lien is available to the bankers, policy brokers, wharfingers,

attorney of court.07. A garnishee order is issued at the instance of – judgment creditor

08. A power of attorney refers to – an authority to act on behalf of another person09. A negotiable instrument payable to order is negotiated by endorsement and

delivery10. A post dated cheque affects the risks of the – paying banker11. DRT act was passed in the parliament for establishment of tribunal in order to

effect expeditious recovery of debts due to banks and financial institutions.12. A crossing of a cheque means – two transverse parallel lines placed on top

left hand corner of a cheque13. Converting a cheque from order to bearer – is considered to be material

alteration in the cheque14. As per section 138 of Negotiable Instruments act, 1881, the payee of a cheque may

initiate criminal action when the cheque is returned for the reasons – insufficient funds.15. A demand draft is – an order to pay money drawn by a bank upon itself or upon

another bankto pay a certain sum of money either to or to the order of a specified person.

16. While collecting a cheque/bill etc., for a customer, the bank acts as an – agent of the customer

17. The monetary jurisdiction of the debt recovery tribunal is – Rs. 10 lakhs and above

18. Charging a security means – making the security available as a cover for an advance in the case of default by the borrower

19. A mortgage means – transfer of an interest in specific immovable property for the purpose of securing a loan

20. In the case of equitable mortgage – no mortgage deed is required to be executed

21. The liability of the guarantor is – co extensive with that of a principal debtor22. When the bank grants overdraft facilities to a customer; however, the account is in

credit balance, the banker is a debtor and the customer is a creditor23. Right of set off in the case of a banker refers to – setting of an amount due from

the customer on the dues from some other customer.24. Legal proceedings – can be initiated in cases where the debtor is unwilling to

pay or refuses to pay the overdue debt.25. Nomination in respect of bank’s deposit accounts – does not affect the right of

claim26. Inchoate instrument is one – which is incomplete as to its date, amount or

name of the payee27. Once a draft is issued – it is open to the purchaser to get the draft cancelled

before it is delivered to the payee28. The role functions and tasks of the recovery agents will be generally mentioned in

the – debt recovery agreement with the bank29. The securitization and reconstruction of financial assets and enforcement of banking

security interest act – SARFAESI act – allowed the banks to take possession of the assets of defaulting borrowers and charged to the bank – without entering into any legal process

30. A mortgage involves – transfer of interest31. Term deposits cannot be transferred to – third parties32. Salaried employees, people belonging to lower economic strata, government

departments, government owned companies and regulatory and statutory bodies are called as low risk customers or level I customers

33. High net worth customers, nonresident customers, blind people and pardanishin women are called as medium risk customers or level 2 customers

34. Trusts, charities, NGOs, companies having close family share holding or beneficial ownership, firms with sleeping partners, accounts under foreign contribution act are called as high risk customers or level 3 customers

35. Politically exposed persons of foreign origin, those with dubious reputation as per public information available, accounts of non face to face customers, high net worth non resident accounts and bullion dealers are called as high risk customers or level 3 customers.

36. Periodical updation of customer data has to be done by obtaining latest photograph and address proof as per KYC guidelines

37. Periodical updation of KYC guidelines – once in five years for low risk customers38. Periodical updation – once in two years in the case of medium and high risk

customers39. Periodical updation has to be done on quarterly basis in April, July, October and

January.40. Trusts, NGOs, charities and organizations receiving foreign funding are to be

treated as high risk customers.41. Savings bank deposit is called as the “mother of deposits”42. Savings bank accounts should not be opened for government departments,

bodies depending on budgetary allocation for performance of the functions43. Minimum balance is waived while opening the account in the case of Non Resident

Indians, students, pensioners drawing pensions through the bank, employees of the bank and ex employees of the bank who are eligible for preferential rate of interest.

44. The unique identification number project of Government of India headed by Nandan Nilekeni is called as – AADHAAR

45. Right of set off is applicable in the case of two or more accounts having debit and credit balance in same or different branches

46. Right of set off can be exercised if there is a relationship of debtor and creditor, creditor and debtor simultaneously, in the same name and capacity

47. Right of set off cannot be exercised when garnishee order or attachment order has been served on the account

48. The status of nominee – is the trustee for legal heirs49. Nomination can be for individual accounts and proprietorship accounts only and not

for partnership accounts, companies, trusts, societies or hindu undivided family50. Nomination can be in favour of individuals only and he can be a resident

individual, nonresident individual, minor or an insolvent person.51. A minor can be a nominee; however, he cannot appoint a nominee52. In the case of either or survivor account, anyone can operate the account till both

are alive and after death of either of them, the bank can pay the balance to the survivor without any formality

53. In the case of accounts payable jointly, when anyone dies, the bank would pay the balance to the survivor along with the legal heirs of the deceased person.

54. According to section 183 of Indian contract act 1982, a minor cannot appoint an agent; he cannot delegate powers to others and a minor can be appointed as an agent and bind his principal on his appointment as an agent

55. The cheque which contains the exact mirror image of a paper cheque with the use of digital signatures is called as electronic cheque or truncated cheque

56. When it comes to endorsement by minor, a minor can endorse under section 26 of negotiable instruments act, but he will not be liable as an endorser

57. According to section 85A of Negotiable Instruments act 1881, the demand draft is an order to pay money, drawn by one office of the bank upon another office of the same bank for a sum of money payable to order on demand.

58. The instruments which have been legally recognized as negotiable instruments as per customs and usages of the trade are – pay orders, banker’s cheques, government promissory notes, certificate of deposits, commercial papers, treasury bills, hundi, bill of lading, railway receipts, dock warrants, warehouse receipts (wharfinger certificates) delivery orders, GRs issued by transport operators approved by Indian Banks Association, Lorry receipts approved by Indian Banks Association

59. Airway bill is neither a document to title to goods nor recognized as negotiable instruments

60. In the case of promissory notes payable in instalments on default in payment of one instalment, the entire amount becomes payable

61. In the case of safe deposit lockers, the bank is called as the lessor and the customer is called as the lessee

62. In the case of locker hired jointly with joint operations and nomination, if any hirer dies, the access will be given jointly to survivor and nominee

63. Cases upto Rs. 20 lakhs can be entertained in Lok adalats and above Rs. 20 lakhs to be referred to DRT Loak adalat

64. Lok adalat was created under legal service authority act, 198765. No appeal against the decisions taken by Lok adalat as the decree is the

consent decree66. Banks can call Lok Adalat with application to high court67. Savings deposit is called as the mother of all deposits68. Joint accounts can be opened for savings bank accounts with maximum of four

persons

The official language policy came into force in India from which date?

BANK EXAMINATIONS – GENERAL ASPECTS - PART: 013

OFFICIAL LANGUAGE

01. The Official Language Policy came in to force with effect from 26.01.1950. The act was passed during the year, 1963

02. The Parliamentary Committee on Official Language has to be constituted with 30 members – 20 from Lok sabha and 10 from Rajya Sabha

03. Official Language rules were framed during 1976

04. Official Language Rules are applicable- to all states and union territories except Tamil Nadu

http://gaurisankar.blogspot.com/2015/02/the-official-language-policy-came-into.html

05. Under Rule 5, all letters received in Hindi are to be replied in Hindi only

06. As per Rule 10c of the Official Language act: - a letter received in Hindi is to be replied in Hindi only

07. It is the responsibility of administrative head of each branch/office/department to ensure that the provisions of Official Language act are complied with (rule 12(1)

08. Canara Bank Rajabasha Akshay Yojana Award is given to branches/offices for usage of Hindi

09. Canara Bank Rajabasha Puraskar Yojana Award is given to - employees for using Hindi in day to day official work

10. Indira Gandhi Official Language award scheme is given by Government to - Ministries, Banks, Financial Institutions for using of Hindi

11. Indira Gandhi award for original books written by employees in Hindi – First Prize – Rs. 10000.00; Second Prize: Rs.8000.00; Third Prize: Rs. 5000.00

12. All branches to have Official Language Implementation Committee with branch head- as the Exofficio Chairman. At least one meeting every three months

13. The Official Language Committee has to be - reconstituted every year

14. As per Section 3(3) of Official Language Act, 1963,- general orders, instructions, circulars, notices etc have to be issued invariably in Hindi and English

15. The quarterly Progress Report on Official Language is due on last day of every quarter

16. Hindi Day is celebrated on 14th September every year – to commemorate the constitutional recognition accorded to Hindi as the Official Language on 14.09.1949

17. Region A – Himachal Pradesh; Haryana, Rajasthan; Madhya Pradesh; Bihar; Uttar Pradesh; Uttarkhand; Jharkhand, Chattisgarh, Union Territory of Delhi, Andaman and Nicobar Islands

18. Region B – Maharashtra, Gujarat, Punjab, Union territory of Chandigarh

19. Region C – All other remaining states

20. In Parliament Hindi and English are used for transaction of business

21. As per section 3(3) of the act, certain specified documents are to be bilingual

22. Script of official language- Hindi is Devanagari

23. The in house distance education programme of Canara bank is CANBANK HINDI PATHRACHAR PATHYAKRAM

24. When 80% of the staff members working in organization attain working knowledge in Hindi in any branch/office, the name of the branch/office will be notified in the gazette under Rule 10(4)

25. Rule 11 specifies that manuals, codes, stationery items etc should be in bilingual

26. As per Rule 12, responsibility of compliance of Official Language rules lies with the administrative head

27. The order of language in the name plates of any Bank in Region C should be Regional Language, Hindi and English

28. Periodicity of Official Language Implementation Committee meetings – quarterly – calendar quarter

29. Town Official Language Implementation Committee – TOLIC meetings – once in six months

30. 50% of total library budget in any organization should be used for purchase of Hindi Books

31. If any staff member passes Banking Praghya, it will be treated that he possesses working knowledge in Hindi

32. IT initiatives in the field of Official Language Implementation – Shabdaratna – word processor, Akruti-MS office, Bankscript – bilingual interface for pass sheet, FDR, leave proceedings etc.

33. Under Canara Bank Rajabasha Akshay Yojana –branches/offices are awarded prizes

34. Under Canara Bank Rajabasha Puraskar Yojana – staff members are awarded prizes

35. Canara Bank has won the consolation prize for the best implementation of Official Language Hindi for the year – 2003/2004 from Government of India (Indira Gandhi Rajabasha Shield)

36. If an employee passes matriculation or equivalent or higher examination with Hindi as a medium of examination he will be treated as having proficiency in Hindi

37. If any typist types 300 notes/letters/drafts in Hindi in a quarter he will be eligible for an allowance of Rs. 80/- per month

38. Incentive to officers for giving dictations in Hindi – 5 letters etc. per day or 250 letters/drafts per quarter – Rs. 1000.00 per month in Region:C

39. If an employee passes Pragya Examination under correspondence course with 70% and above marks he will be eligible for an incentive amount of Rs.900.00 in some banks

40. Hindi magazine published by Canara Bank, Head Office, Bangalore – CANJYOTHI

41. Hindi divas is celebrated on – 14 th September, each year

42. The articles of constitution dealing with official language are– 343 to 351

43. Hindi was declared as official language of the Indian Union with effect from 14.09.1949

44. Hindi Pakhwara (Hindi fortnight) is celebrated from September 1 to 14 each year.

What is the difference between lien and set off?

BANK EXAMINATIONS – GENERAL ASPECTS - PART: 012DIFFERENCES

DIFFERENCES

LIEN SET OFFIt is the right of a creditor who holds the securities/goods of debtor to retain the same till the debt is cleared

It is a cross claim for liquidated amount

To have the right of lien, the creditor should have acquired possession of the goods in the ordinary course of business

Both the claim and set off must be mutual debts due from and to the same parties under the same right

Lien is an indirect charge on the security

In case the account is stopped by death or insolvency of the customer, bank’s right of set off accrues automatically

Right of lien implied To exercise the right of set off notice is a must

NOMINATION DEATH CLAIM SETTLEMENT

Nomination is done by the depositor Legal heirs get their rights by relationship

Nominee may be different for each deposit

Legal heirs are the same for all deposits

Nominee gets his right only on the death of the depositor

Legal heirs rights are based on devolution of property

Claim is settled only to one nominee Claim is settled to one or more legal heirs

Discharge from nominee is adequateDischarge from all legal heirs is necessary

PLEDGE HYPOTHECATION

Means bailment or delivery of goods or documents by the borrower to the creditor with an intention to create a charge thereon as security for the debt

Hypothecation is an equitable charge in lender’s favour over goods

Ownership is with the borrower and possession is with the lender

Both ownership and possession is with the borrower

The right of sale of goods can be exercised by sending a notice to the borrower

Sale of goods can be made only with court intervention

Being contract of bailment, the banker has the right of duties of pledge

No such duties and responsibilities are thrust upon the lender

If the borrower is a limited company, the registration of charge is not necessary

Registration of charge is a must

GUARANTEE SOLVENCY CERTIFICATE

Issued by the bank guaranteeing performance of a promise

It is a certificate which conveys the solvency of the customer

Contingent liability on the part of the bank

No such certificate

Protective clause is a must No such clause is requiredIssued in the format as required by the customer subject to approval by Legal section

Issued in the prescribed format designed by the bank by the branch where the application is submitted

GUARANTEE INDEMNITY

It is a contract to perform the promise or discharged liability of a third person in case of his default

A contract by which one party promises to save another from the loss caused to him by the conduct of the promisor(indemnifier) by the conduct of any other person

The surety undertakes his obligation at the request of the principal debtor

No such request is required. Indemnifier agrees on his own

Three parties – Principal debtor, beneficiary(creditor) and the surety(guarantor)

Two parties – indemnifier and the beneficiary

The liability of the surety is dependant on the default of the third party

Depends on the possibility of risk or some loss

Surety on payment of debt to the Indemnifier cannot sue third parties his

creditor, can proceed on his own name against the principal debtor(right of subrogation)

own

GARNISHEE ORDER ATTACHMENT ORDER

Issued by the court on the application made by the judgment creditor in a situation where the judgment debtor refuses to pay debt payable to him

Attachment orders are issued by the assessing officer or tax recovery officer on the bank having any type of deposit in the name of the assessee from whom money is due or may become due

First order – NISI and then order absolute

Always in the absolute forms

Recovery of private dues Recovery of dues as arrears of income tax

On clear balance available in the account at the time of receipt

Applicable on subsequent balance upto the time total amount is not recovered

SAFE CUSTODY OF ARTICLES SAFE DEPOSIT LOCKERS

Bank is bailee and the customer is bailor

The bank is a lessor (landlord) and the customer is a lessee (tenant)

No space is leased out to the customer

A small locker in the lockers cabinet is leased out to the customer

There is no involvement of the customer with the operation of the vault where the valuables have been kept by the bank

The locker is opened jointly by the bank with master key and by the customer with hirer’s key

No requirement of password Password must be asked before allowing the operation

The customer delivers the valuables/articles to the bank for keeping in safe custody

The customer himself keeps the articles in the locker

The customer can take charge according to the size of the articles

The customer operates the locker itself and may take out any article as per need

Summons are to be issued to the defendants within how many days?


CIVIL PROCEDURE CODE

01. Summons are to be issued to defendants: within 30 days from the date of filing suit02. Written statement has to be filed by the defendants within – 30 days of service of the summons which can be extended to 90 days by the court03. Time fixed for any act under the code can be extended not exceeding – 30 days in total04. The plaintiff has to produce documents and pay requisite fee within – seven days of orders of the court05. If the summons are returned plaintiff has to apply for a fresh summons – within seven days of return failing which suit shall be dismissed06. Adjournments will not be granted for more than – three times during the hearing of suit07. Summons can be served by private Courier- approved by High court/district court or through email, fax registered post-ack due08. No appeal can be filed other than question of law – if the suit amount does not exceed Rs. 10000.0009. No second appeal can be filed from the decree of money suit if the amount – does not exceed Rs. 25000.0010. No arrest of Judgment debtor can be made if decree amount – does not exceed Rs. 2000.0011. No arrest of judgment debtor in a civil suit can be made - irrespective of the amount if she is a lady12. If the decreed amount exceeds Rs. 2000.00 - but does not exceed Rs. 5000.00 arrest can be made for a period not exceeding six weeks13. If the decreed amount exceeds Rs. 5000.00 – arrest can be made for a period not exceeding three months14. Fine for non-compliance of summons - is Rs. 5000.0015. In execution of decree by civil court - basic things like cooking vessels, clothes. personal ornaments as per religious use, tools for making livelihood, family pension, gratuity wages of labourers, dwelling house wages of labourers etc. cannot be attached16. In execution of decree by civil court – if the house is mortgaged it can be enforced17. In execution of decree by civil court – the salary to the extent of first Rs. 1000.00 and 2/3 of remainder cannot be attached

CONSUMER PROTECTION ACT- 1986(COPRA)

18. Deficiency means - any fault, imperfection, shortcoming in quality/nature/manner of service19. Complaint has to be filed - within two years from the cause of action20. District forum – claims upto Rs. 20 lakhs21. State commission – claims of above Rs. 20 lakhs upto Rs. 1 crore22. National commission – claims of above Rs. 1 crore23. Bank has to file its version – within 30 days of notice24. Non compliance of orders of forum will attract – a fine of upto Rs. 10000.00 or imprisonment for three years or both25. Appeal to be filed against orders of District Forum in State forum – after depositing 50% of the amount granted by State Forum or Rs. 35000 whichever is less26. Appeal against the orders of National Forum – can be filed before Supreme Court after depositing 50% of the decreed amount by the National Commission or Rs. 50000 whichever is less27. Limitation for filing of appeals – 30 days from the orders

BANKIING OMBUDSMAN SCHEME

28. In order to proceed under the scheme – the customer has to first write to the bank29. If the bank has not replied within one month or rejected the complaint or if the reply of the bank is not satisfactory to the customer – then he can prefer complaint with the banking ombudsman30. Limitation for filing Complaint is - one year from the date of reply from the bank31. When no reply is received from the bank - then one year and one month from the date of complaint32. The award by Banking Ombudsman would be - actual amount of loss or Rs. 10 lakhs whichever is less33. Bank has to settle complaint – within one month of receipt of the same34. Bank has to honour the award - within one month from the date of acceptance of award by the complainant35. Any person aggrieved by the award – may prefer an appeal within 30 days before the appellate authority (RBI Deputy Governor)36. In case the bank has to file an appeal – they have to obtain permission of Chairman and Managing Director and in his absence, permission of Executive Director for preferring appeal has to be obtained

HRD MEASURES OF THE BANK

37. Study circle – is a forum to expand the knowledge horizon of employees and it helps employees know various information through persons skilled in those areas38. Brainstorming sessions – it is a forum for obtaining feedback from the participants during a predetermined forum for discussion on specific topics and elicit ideas/views/suggestions on relevant topics through discussions so that it can instill thinking process amongst the participants39. Circle Management Board – To formally review all aspects of Circle/s functioning and determine ways and means to improve the working and to monitor the level of implementation of various ideas, schemes, programmes etc.40. Employees’ suggestion scheme – It is a scheme through which various suggestions are obtained from all sections of employees. Suggestions are obtained in regard to changes/modifications in procedures/systems of the bank41. Branch visits/interface – To review and monitor the branch’s functioning and to guide the personnel in all matters42. Training – To induct the employees, develop skills, impart knowledge on functional and behavioural areas and to develop potentiality and personality of the individual43. Quality Circle – It is a voluntary group of employees working in the same work area coming together to solve work related problems44. Employees’ Recognition Scheme – All employees are motivated to take part in various developmental activities like deposit mobilization, recovery, clientele build up and they are awarded for their contributions by enrolling them in various clubs like Chairman’s Club, ED’s Club and GM’s club etc45. Staff Meeting – To foster team building and to provide a forum for individual development. Corporate objectives can be propagated and the talents of employees can be recognized. It promotes a two way communication and is an useful tool for improvement in work culture46. Entry interview – To introduce the details of history and culture of the bank to the new entrant and to make the new entrant comfortable to the new atmosphere47. Exit interview – To get a free and frank feedback from the person leaving the organization and to bid a warm farewell to the outgoing employee

FOREX – AT A GLANCE

48. FEMA- Foreign Exchange Management Act replacing FERA – Foreign Exchange Regulations act – came into effect from 01.06.199949. Schedule I – prohibited “TXN”50. Schedule II – Central Government permission required51. Schedule III – deals with purpose, limits where RBI permission is required in cases like – gifts exceeding USD 5000; donations exceeding USD 5000; Private visits exceeding USD 10000 per financial year; private visits exceeding USD 25000 per occasion52. Release of forex upto US dollar 1 lakh – for medical treatment53. Education, emigration and employment – mere documentary proof of exchange can be released54. For beyond documentary proof for release of forex – RBI permission is required55. LRS - Liberalised Remittance Scheme for individuals56. Individuals can remit – USdollar 2 lakhs per financial year57. Individuals can conduct – any permissible current account and capital transactions58. Who can open LRS ? – a banker can allow any customer who has completed one year of satisfactory dealings can open(provision of PAN is a must)59. Each individual in a family – can individually enjoy the limits indicated60. NRIs (Non Resident Indians) – any person residing abroad for more than 182 days during the preceeding financial year; any person going abroad for gainful employment or circumstances indicating indefinite period of stay abroad; wife accompanying Non Resident Indian abroad is also treated as NRI; Officials deputed to Embassies, UNESCO etc; Indian students going abroad for studies abroad whether he earns or not61. Persons of Indian Origin – Foreign Nationals whose parentage can be traced back to India and their parents or grant parents holding Indian passport or they are citizen of India62. Foreign tourists visiting India – can open Non Resident Ordinary account for six months period63. RBI permission is required – to retain the account beyond six months period64. Foreign Nationals visiting India with work permits for studies, for business and their spouse accompanying them to say in India – can open domestic savings bank accounts and KYC has to be satisfied65. For students – certificate from educational institution is a must66. For opening accounts of Nationals belonging to Pakistan, Bangladesh – RBI permission is required67. Foreign nationals of Foreign Origin – are eligible to open NRO account68. QA 22 account – discontinued69. Foreign entities can also open – NRO account70. TDS in NRO account – normally 30%; educational cess: 3%71. Interest income can be repatriated - subject to payment of income tax72. Repatriation upto USdollar 1 million per financial year – for all bonafide purposes subject to documentary proof73. NRO – casual overdrawings: No limit/no ceiling as per FEMA – as per discretion of the bank

NON RESIDENT EXTERNAL ACCOUNT

74. TDS – not applicable to NRE account ( no tax liability on income earned through interest)75. Joint accounts – NRI along with NRO not permitted76. NRE account – letter of authority can be issued to NRO77. Letter of authority holder – only for local payments

78. Power of attorney holder in NRE account – apart from local payments investment is also permitted79. Loans to power of attorney holder – permitted with specific provision and independent permission is required80. Power of attorney holder – cannot open/close the account81. Transfer from NRE to NRE account – permitted freely if the depositor himself gives instructions82. NRE TOD – Rs. 50000/- as per FEMA guidelines83. NRO TOD – No limit84. NRE term deposit – LIBOR SWAP rate prevailing on the last day of the month applicable to USD for the corresponding maturity plus 175% basis points85. FEDAI – (Foreign Exchange Dealers Association of India) displays the rate - in their websites

FCNR(B)

86. LIBOR (London Inter Bank Operations Rate)– swap rate prevailing on the last day of the month applicable to respective currency for corresponding period plus 100 basis points87. Banks are generally permitted to open accounts in – US dollars,GBP, Euro, AUD, CAD, YEN88. FCNR (B) accounts not opened in – Yen in Canara Bank89. FCNR FDR – minimum one year90. FCNR KDR – minimum one year + one day91. FCNR FDR – Interest payable at the time of maturity if accepted for a minimum period of one year92. If interest is to be paid before maturity date like monthly/quarterly interest etc – minimum period is one year + one day93. No interest is payable – if closed before one year94. Joint deposits – If one party dies and the account is closed, no penalty is levied95. Latest guidelines – party is closing FCNR account before maturity in US dollar; but wants to invest in EURO, then penalty will be 0.5%(however normally penalty is 1%)96. Loan against NRE deposit – maximum loan NRE/FCNR:Rs. 20 lakhs only irrespective of number of deposits held by the depositor97. Opening of account in third currency – is permitted98. Loan is granted – in native currency (say rupee)99. Interest on loan if it is remitted in Indian rupees – BPLR minus 3.5%100.Loan in Indian Rupees – not to be credited to NRE account and only to NRO account and loan in foreign currency amount can be credited to NRE account or repatriated – however, closure of loan account from NRE account only or adjustment of NRE deposits

What is the formula for calculating tangible networth?


(RELATED TO BALANCE SHEET)

01. Tangible net worth is calculated by the formula: Share capital + General Reserves – intangibles and fictitious assets

02. Miscellaneous expenditure and preliminary expenses are called as - fictitious assets03. Goodwill, patents, copyrights etc. which have no physical form are called as – intangible

assets04. Net working capital means: Total current assets less total current liabilities05. Net working capital is also called as: Long term sources less long term assets06. Long term liabilities are also called as - long term sources07. Long term assets are also called as – long term applications or long term uses08. Balance sheet - is a statement showing the business details called as assets and

liabilities of a firm as on a particular date09. Working capital gap means – total current assets less total current liabilities other

than bank borrowings10. The operating profit is called as gross profit

11. Net profit means – operating profit plus other income minus other expenses and provisions for taxes

12. Net sales means – Gross sales minus excise duty and sales returns13. Contingent liabilities like guarantees, letter of credits etc - will not appear in a balance

sheet14. Profit and loss account is - a statement showing the income earned and expenditure

incurred by a firm during a specific period15. The process of reducing a large amount of historical financial data to a similar set of more

useful information for decision-making purposes is called as – financial analysis16. Profits made in the normal course of a business and retained in the business is called

as general reserves17. Current assets are those which are – forming part of the operation cycle or realizable

within a period of twelve months18. Current liabilities are those which are – forming part of the operation cycle or payable

within a period of twelve months19. Margin money for issue of any letter of credit or a guarantee can be considered as – part of

current assets20. The ratio which indicates the ability of quick assets in meeting the current liability or quick

liability is called as – quick ratio21. Quick assets are nothing but – current assets less inventory22. Quick liabilities are nothing but – current liabilities less bank borrowings23. When operations of a business result in losses, it would reduce – shareholders funds24. Bills purchased by the bank will be reflected as under in the analysis of the balance sheet –

bills purchased is shown under current liability and bills under sundry debtors in current assets

25. Advance payment from customers will be treated as – current liabilities26. Advance payment paid to suppliers will be treated as – current assets27. The positive current ratio of a firm will indicate – the presence of net working capital28. The negative current ratio of a firm will indicate – the absence of any net working

capital29. Current liabilities more than current assets – denotes the absence of net working

capital30. Similarly long term assets more than long term sources (liabilities) – denotes the absence

of net working capital31. Absence of net working capital is also called as – negative current ratio32. The ratio which could give an idea of the availability of net working capital is called as –

current ratio33. Margin on working capital is brought by a unit from – long term sources34. Current assets less inventory or stock is also called – liquid assets(quick assets)35. Guarantees, letter of credits are called as – off balance sheet items36. Undervaluation of closing stock in the balance sheet will result in – decreasing the gross

profit of the firm37. Investments made in government securities – are not part of shareholders’ funds

38. Debtors velocity ratio indicates – the credit period allowed on sales39. Temporary investments of a borrower (for the purpose of investing short term surplus) in

money market instruments like Commercial Paper, Money Markets Mutual Funds, Certificate of deposits etc. can be classified as – current assets

40. Investments in shares/debentures of subsidiaries and associates are to be classified as – non current assets

41. The statement which shows where the money has come from and where money has gone is called as – funds flow statement

42. Sale of goods will result as - in sources of funds43. Increase in liabilities(capital, reserves, term loan, bank overdraft, sundry creditors, provision

for taxes, advance payment received from customers etc) – are sources of funds44. Decrease in liabilities(capital, reserves, term loan, bank overdraft, sundry creditors,

provision for taxes, advance payment received from customers etc) – are uses of funds45. Increase in assets(land, building, machinery, noncurrent assets, intangible assets, fictitious

assets, cash balance, bank balance, sundry debtors, stock, advance paid to suppliers etc) – are uses of funds

46. Decrease in assets(land, building, machinery, noncurrent assets, intangible assets, fictitious assets, cash balance, bank balance, sundry debtors, stock, advance paid to suppliers etc) – are sources of funds

47. Rent paid in advance is called as current asset48. Prapaid insurance is called as current asset49. Provisions kept for payment towards taxes and any other liabilities are called – as current

liabilities 50. A low current ratio will indicate – the shortage of working capital51. Stock turnover ratio denotes – operational efficiency52. Current ratio denotes – the liquidity position of the firm53. Breakeven point means – the point where the unit meets the total cost by total sales

revenues54. Contribution in break even analysis is – surplus available in sales revenue after

meeting all variable costs55. Holding level of raw materials is related to – consumption of raw materials56. Holding level of stock in process is calculated in relation to – cost of production57. Level of finished goods is in relation to – cost of goods sold58. Level of sundry debtors is in direct relation - to gross sales59. In funds flow analysis, any increase in sundry creditors for goods is treated as – sources of

short term funds60. Increase in gross block of fixed assets is – uses of long term funds61. In funds flow analysis, diversion of fund means – long term deficit funded by short term

surplus62. In the case of availability of subordination of unsecured loans, then such unsecured loans

shall be treated as – long term funds63. Chargeable current assets are – inventories and receivables64. The ratio of long term loans to networth of the company is called – debt equity ratio65. Term loans are considered as long term liabilities whereas instalments in term loan which

are payable within a period of twelve months are called – current liabilities66. The liquidity of the bank is determined by – converting its assets to cash quickly and

at good costs67. A bank’s own premises, investments in subsidiaries represent- fixed assets68. Price of liquidity is determined by – nature of convertible assets on hand69. Advance payment to suppliers should be treated as – current assets70. Claims against the bank not acknowledged as debts called the contingent liabilities are – off

balance sheet items71. Authorised capital, issued capital and subscribed capital - will not appear in a balance

sheet72. Preference share capital is the contribution of - preference shareholders

73. Dividends to shareholders are payable from general reserve and – not from capital reserve

74. Shareholders of equity capital are having voting rights whereas – the shareholders of preference shareholders are not having any voting rights

75. Reserves are classified into - general reserve and revenue reserve76. Capital reserves are classified into - fixed assets revaluation reserve and share

premium reserve77. Revenue reserves are – the accumulated earnings from the profits of normal

business operations78. Funds are made available for distribution of profits amongst the shareholders from –

revenue reserve79. Borrowings made by the company by creating a specific charge on assets of the company

are called as– secured loans80. Borrowings made by the company for which no specific security is offered are called as –

unsecured loans81. In the case of a company, fixed deposits(by the public), inter corporate deposits(by other

companies) and loans availed from the promoters and directors are – unsecured loans82. In the balance sheet of a partnership firm, original cost of fixed asset less depreciation is

called as – net block83. The working capital cycle of any manufacturing organization consists of five stages

of conversion called– raw materials to work-in-progress; work-in-progress to finished goods; finished goods to bills; bills to cash and cash to raw materials

84. The quantum of working capital requirements depends on two factors as – level of activity and delay in the working cycle

85. The components of working capital requirements are – raw materials and consumables; work-in-progress; finished goods; bills receivables and expenses

86. Cost of production consists of – consumption of raw materials(including stores) and spares; power and fuel; direct labour; repair and maintenance; other manufacturing expenses plus opening balance of stock-in-process and minus closing balance of stock-in-process

87. Cost of sales consists of – cost of production plus opening stock of finished goods minus closing stock of finished goods

88. Net profit minus dividend paid/declared is called as – retained profit89. Break-even-point – is the point in terms of rupees, at which total costs equal total

revenue, and profit equals zero90. Contribution margin is – total revenue less total variable costs91. Contribution margin per unit or unit contribution is – selling price per unit minus

variable cost per unit92. Contribution margin ratio is – contribution margin per unit as a percentage of the

selling price93. Costs which are not directly associated with production and remain constant for a relevant

range of productive activity is called as – fixed cost94. The maximum percentage by which expected sales can decline and a profit can still be

realized is called as margin of safety95. Costs that are fixed up to a certain level of output but will vary within certain ranges of

output is called as – mixed cost96. The range of output over which the amount of total fixed costs and unit variable costs

remains constant is called as – relevant range97. Costs which are directly associated with producing a product and which vary with this level

of output is called as variable cost98. Average business per employee in a branch is calculated by the ratio- (average deposits

+average advances) divided by number of staff in a branch99. Number of accounts per employee in a branch is calculated by the formula: (Total deposit

accounts + total borrowal accounts) divided by the number of staff in the branch100.The notional price at which inter-departmental exchange of goods/services takes

place within the company is called as – transfer price

Who is responsible for filing the particulars for getting a charge registered with Registrar of Companies?


01. Under Section 125 of the Companies Act, the filing of particulars for getting a charge registered with Registrar of Companies for certain transactions is the responsibility of – borrowing company

02. Excellent Bank receives a cheque with account payee crossing and special crossing in favour of Superior Bank. The cashier of the Superior Bank presents this cheque for cash payment to the Excellent Bank – Even though the cheque bears account payee crossing, since it is presented by a bank, it can be paid in cash

03. Your bank sanctioned a loan of Rs. 2.00 lakhs against the security of national savings certificates in favour of a person called – Raman, who has expired recently in a road accident – The payment of National Savings Certificates will be obtained by the bank

04. For financing a pumpset, which of the following standards will be taken into account ? – Bureau of Indian Standards

05. Excellent Bank issued a fixed deposit in the name of Mr X and his wife Mrs. Y. Mrs Y comes to the bank and requests for premature payment to meet the expenses on treatment of Mr X who is admitted in a hospital and cannot sign, because of a fracture in his hands – payment can be made after verifying the facts and after obtaining the thumb impression of Mr. X presently in the hospital duly witnessed by the attending doctor

06. Mr X and Mr Y are having a joint account in which they have nominated Mr A. On the death of Mr. X, Mr A approaches the bank for payment – being nominee, payment would be made to A and to Y and legal heirs of X

07. Popular Bank has issued a term deposit receipt in the name of Mr A and Mr B to be operated as former or survivor. A approaches the bank for addition of name of Mr Y, his son and also nominated Mr Z, his brother in law. He claims that the money belongs to him – without the consent of Mr B, addition or nomination cannot be accepted

08. Which of the following cannot enter into a valid contract ? – a minor (In the case of illiterate or blind, if major, they can)

09. Preservation of bank records is mandatory under which act ? – Banking Regulation act-1949

10. Banks are required to submit to RBI a statement of unclaimed deposits. What is the time period for considering a deposit as unclaimed deposit ? – the deposit which is not operated for ten years

11. As per Central Vigilance Commission guidelines, CVC has jurisdiction over which category of the following ? – Senior Management Grade V and above

12. Which of the following is true with regard to creation of equitable mortgage ? – It can be created at centres notified by the State Government only.

13. Who had launched RIDF scheme ? – Government of India14. Tarapore Committee recommendations are associated with which of the following ?

– Capital Account Convertibility15. What is the maximum amount up to which the award can be given by the Banking

Ombudsman ? – Rs. 10.00 lakhs16. The capacity in which the Banking Ombudsman functions in respect of dispute among two

banks is known as that of – Arbitrator

17. A person not having a PAN and not liable to pay income tax is required to make a declaration on which of the following – Form No: 60

18. Lending for a public company is restricted as per Section 293(d) (i) – Paid up capital and free reserves

19. Upto what extent no collateral security is required to be obtained by the banks, for sanction of education loan – Rs. 7.50 lakhs

20. What is the full form of the term – O B U ? – Off-shore Banking Units21. Ghosh Committee is associated with which of the following aspects of banking ?– Bank

frauds, Concurrent audit system and Photograph in deposit accounts22. What is the minimum maturity period for which commercial paper can be issued ? – 7 days23. Section 31 of RBI act covers which of the following aspect of financial sector ? – Restricts

issue of bills of exchange payable on demand to the bearer by any person other than RBI and Central Government

24. Negotiated Dealing System relates to which of the following aspect of financial sectors ? – Submission of bids for participation in government securities

25. Real Time Gross Settlement is connected with which of the following ? – Centralised payment system being run by RBI

26. What is the full form of CIBIL ? – Credit Information Bureau of India Limited.27. By an exporter, which of the following kinds of letters of credit are given preferences ?

– Irrevocable without recourse confirmed.28. The term – FEDAI stands for which of the following ? – Foreign Exchange Dealers

Association of India29. XYZ Limited, a joint stock company has been under voluntary liquidation on the basis of

resolution passed by the shareholders of the company – Its assets would be in possession of the Official Liquidator

30. Mrs Lakshmi, running a chemist shop is maintaining a current account as proprietor in the name of M/s Lakshmi Medicos for the last five years. She wants to nominate her minor son aged six years to this account – If the name of the person who would obtain payment on behalf of the minor is also indicated, the nomination can be accepted

31. Mr Z has been availing a housing loan of Rs. 10.00 lakhs from your branch which has been showing some irregularity due to irregular payment being made by the borrower. You have come to know that he is having a current account in the name of his proprietorship firm at another branch of the bank in another town – bank can exercise right of set off since it is a proprietorship account

32. A private limited company namely: ABC Private Limited wants to open a current account with your branch. Which of the following are not required to be obtained from the company ? – Introduction by any other accountholder

33. FCNR (B) – Foreign Currency Non Resident (Bank) accounts34. SARFAESI – Securitisation and Reconstruction of Financial Assets and Enforcement

of Security Interest Act, 200235. A power of attorney holder of a locker holder approaches for surrender of the locker – As

per the power of attorney, he has the powers to operate the locker only and not to terminate the contract

36. Cheque signed by the agent, who has expired, is presented for payment – Payment would be made

37. Willful loan defaulter – Report to be sent to CIBIL for the loan accounts of Rs. 25.00 lakhs and above

38. Willful loan defaulter – Report to be sent to RBI for loan accounts of Rs. 25.00 lakhs and above

39. Vehicle financed to partnership firm. How registration would be done ? – In the name of the firm with the name of the bank as hypothecatee

40. Protection in the case of material alteration available to the bank – Under section 89 of Negotiable Instruments act

41. Which act defines mortgage ? – Transfer of property act-188242. Right of set-off is available to the bank due to – Contractual binding

43. When a cheque is endorsed in blank – effect is that it becomes payable to the bearer44. In a joint account of A and B, if B expires, payment to be made to – A and legal heirs of

B, if survivorship clause is not there45. A cheque crossed not negotiable – It can be transferred but no one can become

holder in due course for such cheque46. Executor of a will or administrator would sign the bank account opening form as – X, the

executor/administrator for the deceased A47. Protection to collecting bank for a cheque is available – Under section 131 of Negotiable

Instruments Act48. Illiterate wants to give mandate to someone to operate the account – It can be permitted

with properly witnessed mandate49. In a HUF, whether Karta can appoint agent ? – Yes, he has the absolute authority for

conducting the affairs of the HUF business50. Stop payment instruction received from a Coparcener for a cheque issued by the Karta

– Bank will not accept51. Cheques received in clearing for payment from an account – Garnishee order will be

applicable on the amount of cheque, if returning time is still available52. Usance bill of exchange – Time available to drawee for acceptance – 48 hours after

presentment53. Overseas Banking Unit branch for the limited purpose is treated as– a foreign branch of

the bank54. RIDF is operationalised by – NABARD55. Committee associated with computerization and mechanization – Rangarajan committee56. Maximum Limit for General Credit Card – basic limit of Rs. 25000.0057. Credit Guarantee Fund – Maximum cover amount – Rs. 18.75 lakhs58. Special Crossing – Payment can be made to the bank in whose favour the crossing is – if

the endorsements are in favour of two banks, payment to the bank functioning as agent

59. FAS stands for – Free Alongside Ship (an Inco Term)60. Crystalisation of liability of importer within – 10 days61. Sale and purchase of securities on behalf of a customer – Relationship – bank agent62. Priority of charge in the case of a company, when registered on the same date – The bank

whose documents have been signed first63. Stop payment instruction given by the latter (2nd named) in the case of former/survivor

account –bank would not accept64. Power of attorney or mandate in favour of a minor for locker operation – will be permitted65. Admission of new partner in a partnership firm – consent of all partners required66. Guarantee has been defined in – Indian Contract Act-187267. Nomination provisions have been provided in – Banking Regulation act 194968. Committee on Monetary Aggregates – Y B Reddy69. Minor aged 15 years presents a cheque for payment – Payment can be allowed by obtaining

signatures on the backside of the instrument – No endorsement is needed70. Nostro Account – An account of a branch of a bank established in India with the

branch of a foreign bank established outside India71. Priority Sector advances target for foreign banks – 32% of Net bank credit72. Statutory liquidity ratio should not be more than 40% as per Banking Regulation act73. Who fixes the agriculture produce support price ? – Recommended by Bureau of

Agriculture costs and prices74. Poverty line is based on nutritional requirement75. In the case of nomination, no person other than the nominee to be entertained as per

Section 45ZB of Banking Regulation act 1949, unless there is a court order76. RBI rating is based on CAMELS rating system under banking supervison77. Fixed deposit prepared to give security for the bank guarantee – Not available as

security for any other loan

78. Tier I and Tier II are parts of Capital Fund under capital adequacy guidelines. Tier II cannot be more than Tier I

79. In the case of company accounts, company is a legal person, whose bonafides are already certified by ROC, while issuing certificate of incorporation

80. Company’s incorporation is legally complete, with issue of Certificate of Incorporation. But public limited company cannot commence business in the absence of certificate of commencement of business

81. System of SDF (Sugar Development Fund) is controlled by the Ministry of Agriculture82. Bank gets no protection for a forged cheque – but for forged endorsement, paying

bank is liable83. Where endorsements are irregular, bank does not get any protection84. Period allowed for opening of an account – 15 to 20 minutes85. What is a garnishee order? – an attachment order of a competent court on judgment

debtor’s debtor (in the case of bank deposits, the bank)86. Cheque issued by a company/firm as “yourself”. Received with an endorsement to issue a

bank draft –bank draft will be issued if endorsement is signed by the authorized person

87. Current account in the name of a minor – can be opened but precautions will have to be taken – Section 85 (2) of Negotiable Instruments Act – provides protection to the paying banker in the case of endorsement on a bearer cheque

88. Amount of Fixed deposit where maturity proceeds can be paid in cash – not to exceed Rs. 20000.00

89. DICGC insurance cover for deposit – Rs. 1.00 lakhs per depositor of the bank90. Is nomination in a HUF account is permitted ? – No91. Is nomination in a Proprietorship firm’s account permitted ? – Yes92. PAN quoting – mandatory for preparation of draft by deposit of cash for Rs. 50000.00 and

above93. Cheque issued in favour of a company has been endorsed by the company in favour of a

director of the company– Not to be collected by the bank for the personal account of the director

94. In a trust account on the death of anyone of the trustees – new authority required95. Sans recourse endorsement – where endorser reduces his liability by express words96. Special Crossing favouring two banks – Cheque can be paid only if one of them is an

agent and payment to be made to the agent bank97. MICR is called Magnetic Ink Character Recognition98. Order Nisi – 1st stage in garnishee order- provisional attachment of account99. Protection to collecting bank for draft – Section 131 A of Negotiable Instruments Act

100. Bill of Exchange has been defined in – Section 5 of Negotiable Instruments Act

When sub standard assets can be considered as standard assets?


01. Substandard restructured accounts will become standard - after 12 months of regular repayment of instalments

02. Short duration crop loan will become NPA - after two crop seasons03. Interest on NPA account will be recognized as income after – it becomes due and

received04. A is having a savings bank account and also one overdraft account with debit

balance with the bank. The bank can adjust the credit balance in savings bank account with the debit balance in overdraft account using right of set off

05. X is having a loan account duly guaranteed by Mr and Mrs Y. They are having a fixed deposit for Rs. 40000.00 with maturity value of Rs. 57010/- X defaulted in repayment of the loan and bank on maturity adjusted the loan account of X with the maturity value of fixed deposit and credited the balance to savings bank account of Mr. Y and Mrs. Y. Mr Y and Mrs Y objected to this adjustment since the loan is time barred – bank has the right of set off which it has correctly used (presuming that notice had been given for doing so)

06. XYZ and ABC are two firms having the same partners in both partnership firms. One firm is having a debit balance and other firm is having a credit balance - partners being the same, right of set off can be applied by the bank

07. A solicitor is having two accounts with the bank. One is in personal name and the other is in client’s name. One cheque is presented in “clearing” in client’s account. In the meantime, garnishee order is served on the solicitors’ account. Whether bank will pay this cheque presented in the clearing ? – Cheque will be paid since it relates to client account, which the solicitor has opened in the fiduciary capacity.

08. Mr D is having one overdraft account with us. He is also having three other accounts with us, (namely) his personal savings bank account, joint account with his wife and one guardianship account with his son. Bank can use right of set off in which of these accounts? – Right of set off is available in personal savings bank account only

09. Mr. Seth is having current account with us. He has appointed his son aged 16 years as his agent. Can the minor operate this account after this ? – Since the minor is agent, he can operate it

10. Mr. Sharma has given irrevocable power of attorney to Mr Verma to operate his current account as an agent for one year. After three months, he has decided and gives notice to the bank that Mr. Verma’s authority stands withdrawn. On the contrary, Mr.Verma’s plea is that since he has been appointed as agent for one year, he has every right to operate the account. What will be the position of the bank now to deal with it?– The bank has to stop the authority of Mr. Verma from being used.

11. A minor aged 16 years is having a fixed deposit for Rs. 10000.00 with the bank. He requested before maturity payment of the deposit. Can the bank allow before maturity payment ? – the bank can accept the request of the minor

12. In case a minor is appointed as a nominee for a term deposit and when death of the depositor takes place – payment can be obtained by the guardian of the minor on his behalf

13. After the death of locker holder his daughter comes to the bank with the key to operate the account. What is the course of action that will be suggested by the bank ? – get a letter of administration

14. A company is having immovable property in Bangalore, its registered office is in Chennai and the company is willing to avail bank limits in Mumbai. Where the EMT can be created ? – any one of the above cities presuming that all are notified centres

15. Where a company is failing in filing particulars of charge on its assets with Registrar of Companies, who has got the right to file particulars of the charge with the registrar of companies ? – Creditors of the company

16. In the case of non-registration of charge on assets, in case of a company, the charge will become –void before the liquidator

17. A trust is maintaining an account with the bank operated by three trustees. One of them issued a cheque for credit to his savings bank account. What precautions bank will take ? – Cheque cannot be paid unless proper enquiry is made and the bank is satisfied

18. What is the ceiling of subsidy under SGSY scheme for self help group ? – Rs. 1.25 lakhs19. In the case of KCC, what will be the quantum of insurance in the case of death of the

borrower(farmer) ? – Rs. 50000.0020. Vehicle loan financed by banks are registered with Road Transport Authority with

the sole objective of – getting the charge in favour of the bank so that the borrower can not sell the vehicle without the permission of the bank

21. Under Credit Guarantee Fund scheme, the maximum amount of claim for non fund based limits is – none

22. For group exposure purpose, the non fund based limit sanctioned to a borrower are to be reckoned at which of the following – 100%

23. A company is having stock of Rs. 20 lakhs stored at its godown. It is insured for Rs. 10 lakhs. The company has sent stocks for Rs. 4 lakhs for processing at some distant place where it gets destroyed at the place of processing by fire. What amount of claim will be adminissible ? – Nil

24. Contribution in break even point is equal to – selling price less variable cost25. Which of the following is the objective of introduction of KYC ? – Check

undesirable customers and stop money laundering26. XYZ Limited, a company, has paid capital and free reserves of Rs. 100 crores and it

has already borrowed a sum of Rs. 150 crore on long term basis. It wants to raise debentures of seven years. What statutory compliance, the company will need to make ? – The company’s shareholders will be required to pass a resolution in the general body meeting authorizing the board of directors for the proposed borrowing

27. Digital signature means – a coded confirmation in electronic form attached to an electronic record

28. Pari passu charge in the case of a consortium advance by banks to a big borrower means which of the following ? – Each bank will have a pro-rata charge on the security in the ratio of their outstanding within the limits approved by the consortium.

29. Which of the following net working systems will be used by an organization having office in one building ? – Local Area Net Work

30. An original draft is reported as lost. Its duplicate is issued and is presented in clearing. It is subsequently found that the original draft is already paid in bank’s records – Duplicate will be returned unpaid

31. A endorsed a cheque in favour of B and B endorsed it to C who just signs the cheque. The cheque is stolen by D, who endorsed the cheque in favour of Ashok (an old creditor of D) for valid consideration. Ashok took the payment of the cheque. In this case Ashok is liable to whom ? – He is not liable to anyone since he is a holder in due course

32. A cheque dated: 12.10.2009 is presented for payment on October 27,2009. It is however observed that the cheque book from which the cheque was issued had been issued to the customer on 22.10.2009. What would the bank to do with the cheque ? – The cheque would be paid, if it is otherwise in order

33. Your branch receives a cheque written in three different inks and three handwritings – the cheque will be paid

34. What do you mean by Swap ? – simultaneous purchase of forward and sale of spot currency

35. What is overbought position in the case of Foreign Exchange ? –Foreign exchange purchased is more than foreign exchange sold

36. In the case of cash credit account, the first credit will be adjusted against which of the following? – It will be set-off against the first debit

37. When a party is allowed post-shipment credit, what is the maximum normal time period, during which it is expected to get the foreign exchange realized ? – six months

38. Which of the following meets the feature of a deferred payment guarantee? – A guarantee where payments to be made in instalments are guaranteed

39. A firm receives raw material from abroad for processing thereof and subsequently to be re exported after processing. What kind of guarantee shall be issued for this ? – Performance guarantee.

40. You are approached by an SSI unit that is engaged in an industry, where raw material is available in a particular season of two months only. The assessment of working capital for this would be made by the bank – as per cash budget method

41. The risk that arises to a bank due to failure of internal process is called as– operational risk

42. A partnership firm brings additional funds in the business, but it creates fixed assets out of these funds, which of the following ratio would be affected ? – Debt Equity Ratio

43. Compared to the previous years, there has been an increase in the fixed assets of a firm to the extent of Rs. 5.00 lakhs but its long term liability and net worth increased by Rs. 4.00 lakhs. It would effect –current ratio

44. The comparison of the balance sheet of a firm reveals that its long term uses are lower at 75% of its long term sources. Which of the following must be true ? – Change in Current Ratio

45. A firm had a current ratio of 2:1 and its current liabilities at Rs. 15.00 lakhs. What will be the amount of net working capital of the firm ? – Rs. 15.00 lakhs

46. Working capital term loan to SSI – related committee – Tandon committee47. Education cess is to be used towards – Primary Education48. Limit for Lok Adalat – Rs. 20 lakhs49. Which banks have banking operations in Russia ? – State Bank of India and Canara Bank

subsidiary called as– Commercial Bank of India50. Can a joint stock company become a partner in a partnership firm ? – Yes51. How many working directors are there in a nationalized bank ? – Two52. If a financial director of a company expires, what will be done with the cheque signed by

him? – Bank can make the payment53. Counter guarantee for a bank guarantee is – an indemnity54. Letter of Credit - where the packing credit can be allowed to exporter ? – Red

Clause letter of credit55. How many times a transferable letter of credit can be transferred ? – Once only56. Where on the strength of one letter of credit another letter of credit can be established ? – it

is called “back to back letter of credit”57. Where within the letter of credit already issued more than one drawings are permitted on

roll over basis ? – Revolving Letter of Credit58. If the depositor obtains a loan against a fixed deposit, name of another person can be added

in the deposit– On repayment of loan only59. Prepaid insurance is classified as – Current Asset60. Net Working Capital – Current assets minus Current liabilities or Long term

sources less Long term uses61. Working capital limit of Rs. 20 crores can be sanctioned under which method ?

– Conventional method or Tandon Committee62. Under Nayak Committee, the level of sales is – 5 times the minimum working

capital limit or 4 times the minimum level of working capital63. Advance allowed to a State Sponsored Corporation for on lending to weaker

sections in rural areas – Indirect finance to agriculture64. Amount ceiling for reporting under K Y C – Rs. 10 lakh summation65. Credit Guarantee Fund scheme –benefit to bank – lower capital adequacy and

lower provision in case of account becoming NPA66. NPA can remain for first 90 days as standard assets and beyond that it will be

treated assubstandard assets67. RBI committee on procedures and audit – Headed by S.S Tarapore68. Deduction from salary for union subscription – Check off facility69. Statement of unclaimed deposits to Reserve Bank of India – Under section 26 of

Banking Regulation act-194970. Definition of hypothecation – described in Sarfaesi act - 200271. Cheque written in different scripts – say Tamil and English – valid and it can be

paid72. Debtor turnover ratio – indicates efficiency of collection of book debts73. In the case of former and survivor deposit – addition of name or closure of

account is possible with signature of all accountholders74. On payment of loan by the guarantors, what kind of right is vested with him ?

– Right of subrogation

75. What is the objective of SGSY scheme ? – To bring people below poverty line to above poverty line

76. Non negotiable crossing – a warning to endorsee77. What kind of charge is possible on receivables ? – assignment78. In hypothecation, with whom is the possession or ownership ? – borrower79. Locker on either or survivor operation basis – One reports loss of key and the other comes to

operate with the key – locker is allowed only by joint operation in this situation. 80 Bailee and bailor jdefined in – Indian Contract Act

81. Dishonour of cheques by mistake – Payee claims damages from bank – bank is liable to drawer only

82. Account of foreign bank with a branch of a bank in India – Vostro83. If forged Rs. 500 currency note is received at the counter – a statement received

from the tenderer and the currency note have to be handed over to the police authorities

84. Booting is called – starting a computer85. Input – data fed into a computer86. Selling of foreign exchange – delivery of forex to the customer in lieu of Indian

rupees87. Law charges to be debited to – Profit and Loss account88. Memorandum of association of a company – a document guiding relationship

with third parties or outsiders89. Under-insurance of security – loss can occur due to application of average clause90. For acknowledgment of debt, the Central Government has prescribed the payment

of stamp-duty at which of the following rates – different in each State as prescribed by the State Government

91. When a bank grants a loan to a borrower on the basis of hypothecation of the assets, with whom does the possession and ownership remain ?– borrower

92. What is the amount of limit in respect of priority sector advances in general, where the banks do not charge inspection and service charges ? – Rs. 25000.00

93. The term - mulberry relates to– Sericulture94. What is the maximum amount of a transaction, that can be carried under electronic

funds transfer (E F T) facility being operated by RBI – no ceiling95. Which of the following committees, introduced the term – working capital term loan

representing excess borrowing by a borrowing unit ? – Tandon Committee96. Tax deducted at source while making payment to a contractor should be deposited with the

Government within a period of – seven days from the date of deduction97. Which of the following is the formulae for working out current ratio in respect of a trading

concern ? –Current assets/Current liabilities98. While sanctioning a term loan to a company, which of the following ratios is most relevant

and taken into account by the financing bank ? – Debt Service Coverage Ratio99. Which of the following is not reflected by the study of funds flow statement of a

borrowing unit ? – How the profits have been earned ?100.The registration of which of the transactions on payment of stamp duty is mandatory in India ? –Simple Mortgage

Whether foreign currency loans outside India is available against the security of funds held in FCNR accounts?

BANK EXAMINATIONS – GENERAL ASPECTS- PART: 07

01. Foreign currency loans outside India is available against security of funds held in the accounts of – FCNR(Foreign Currenty Non Resident and Non Resident External)

02. RBI has introduced Comprehensive Single Return (CSR) for collection of data on – Non Resident deposits

03. Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2001, provides for a 60 days notice to a borrower to discharge in full his liabilities before such action is initiated

04. Inflow and outflow of Foreign Exchange is controlled by the government of India under the provisions of – FEMA 1999

05. The validity of import license refers to – the date on or before which the goods should be shipped by the overseas supplier

06. A letter of credit opened in lieu of guarantee in countries like Japan is called as – stand by letter of credit

07. The last date/expiry date of the letter of credit is the last date for – submission of documents to negotiating bank

08. Deferred Payment Guarantee is a financial guarantee09. Which committee has recommended to provide 40% to SSI sector upto Rs. 5 lakh; 20% to

SSI units more than Rs. 5 lakhs & upto Rs. 25 lakhs and balance to SSI units above Rs. 25 lakhs ? – Kapoor Committee

10. IBA’s GRACE has been replaced by – IBA’s banking practices guidelines11. Total working capital requirement of SSI units under the turnover method of working

capital assessment would be equivalent to requirement of minimum 3 months of the annual output value

12. The export declaration form used for software in non-physical form is – softex13. BSFC would take up complaints of frauds involving Rs. 5 crores and above14. After receipt of attachment order from the Income tax authorities – the banker can

exercise right of set-off in respect of existing claim against the customers15. The bill is drawn in London and is acceptable/payable in Mumbai and the drawee is

in Chennai.The bill is – a foreign bill16. The committee constituted by RBI for studying the functioning of Self Help Groups

and non-Government organizations was headed by– Shri S.K. Kalia17. A time of 48 hours (excluding holidays) is allowed to the drawees of which of the following ?

– all usance bills18. Every banking company is required to prepare its final accounts i.e. Profit and Loss

account and Balance Sheet as on 31st March every year in the prescribed forms as per –Banking Regulation Act, 1949

19. In the case of time barred debt the right of set off - can be exercised by the bank provided the debts are due in the same right

20. A sum of Rs. 20000.00 is due from X. The loan is secured by the guarantee of Y. Y’s account with the bank has a credit balance of Rs. 30000.00. Can the bank exercise right of set off against the balance in Y’s account ? - The bank can exercise right of set off only when the borrower fails and a demand is made on the guarantor

21. “A” – a farmer owning land, was granted a tractor loan with “B’ as co-borrower. The tractor was registered only in the name of “A”. When bank filed suit for recovery against A and B , B denied having received any consideration. What are the rights of the bank ? – bank has rights against A and B – both

22. Where the cheque bears crossing with the name of a banker, such a crossing will be called –Special crossing

23. In the case of discrepancy between the amount expressed in words and figures, of a cheque, what will you do ? – The amount in words should be paid

24. Under pledge, the physical possession of the goods will be with the bank25. You have been approached by the secretary of a reputed public trust, which has

four trustees for opening a savings bank account of the trust. While inspecting the trust

deed you observe that the deed does not contain any provision about the operation of the bank account. In such a situation, what will you do ? – Insist on operation by all the trustees jointly

26. When original draft and the duplicate is presented through clearing on the same day, what will you do ? – Pay the duplicate and return the original

27. A minor not competent to receive a cheque is called as – drawee28. “Sans recourse” endorsement is one which – should not be paid until the

following business day29. Section 131 of the Negotiable Instruments Act 1881 gives protection to the

collecting banker against the risk of conversion. The benefits of the section will be available to the banker when he collects- a crossed cheque for a customer in good faith and without negligence

30. In the case of bill of exchange – crossing has no meaning31. A Negotiable Instrument cannot be enforced against a minor when he signs it as – acceptor

of a bill;maker of a promissory note; drawer of a cheque32. A cheque is payable to A or order. A endorses it in favour of B. B loses the cheque. C

finds it and after forging the endorsement of B delivers it to D. D for valuable consideration further endorses it to E. The cheque is dishonoured. What are the rights of E on the cheques ? – E can recover money only from D.

33. Protection is available to the paying banker in respect of – cheques drawn payable to order purports to be endorsed by or on behalf of payee; payment in due course of crossed cheques and cheques on which alteration is not apparent

34. Even after receiving the notice of minor about his attaining the majority, if the bank does not respond to inform his option – He will be held responsible for all the acts of the firm not only after his attaining the majority but also with retrospective effect

35. If the account is in debit and the partner is retiring – stop operation immediately and rule off the account, obtain an acknowledgment of liability not only from the retiring partners but also from the continuing partner and serve notice on the retiring partner that bank continues to hold him liable for the outstanding as from the date the bank is put on notice of the retirement

36. Mr. Ignorance, an illiterate, having a savings bank account is going abroad for a short period, requests the bank to allow Mr. Literate to operate his account. Which document you will propose in order to solve his problem ? – Power of attorney registered with the magistrate

37. A company is said to be registered when it gets – Certificate of incorporation from the Registrar of Companies

38. There is a current account in the name of M/s Kapil Dev and Sons, a Hindu Undivided Family which consists of Mr. Kapil Dev, his wife – Suman Lata and two sons – Dara Singh aged eight years and Tinku aged ten years respectively. Account is operated by Mr. Kapil Dev as Karta of the family. The bank is informed of the death of Mr. Kapil Dev in this case – the account will be operated by Suman Lata as a guardian of the eldest male member of the family(Dara Singh aged eight years old)

39. Under execution of a Civil Decree the following can be attached – right to future maintenance; salary to the extent of the first 1000 rupees and two-third of the remainder; tools of artisans and government securities

40. The limitation period for filing a complaint before Ombudsman – One year from the date on which the bank has rejected the presentation and sent final reply

41. Sharma and Praveen have a joint account. Income tax department served an attachment order on the bank in the account of Praveen– can attach 50% of the balance in the joint account

42. X has been sanctioned a loan of Rs. 5000.00 guaranteed by Y. After sometime, X’s request for another loan of Rs. 5000.00 was accepted without the knowledge of Y. The guarantee of Y is – available to the extent of Rs.5000/- only

43. If a usance bill is returned unpaid, a suit should be filed – within three years from the due date

44. An equitable mortgage can be created – by depositing the title deeds at notified centres with the intention to create the security of the loan

45. A document executed for loan to a company – must be executed with the company’s common seal; must be executed on behalf of the company and must be executed by the authorized officials

46. The effect of a document being time barred by limitation is – no legal remedy will be available

47. The rate at which RBI rediscounts bill of exchange is called as– Bank rate48. In relation to a company, the term – “ULTRA VIRES” – means – an action outside

the Memorandum of Association49. A has savings bank account and wants to make nomination in favour of his minor

son –Nomination in favour of a minor can be allowed only when a person is also appointed/nominated who can receive the payment on behalf of the minor if the accountholder dies during his minority

50. If the female employed makes a complaint to the employer for sexual harassment at work place, how this situation can be handled ? – Bank is bound to inform the appropriate outside investigating authority about the complaint as the offence relates to moral turptitude.

51. What is called as “Working Knowledge” in Hindi ? – Hindi as a subject at Matriculation

52. The new category of account i.e. – “Special Mention Asset category ” or “Special Watch Category” introduced by RBI is for – internal monitoring by banks

53. The sale price of a pen is Rs. 40.00 per piece. Variable cost is Rs. 22.00 per piece. Overhead cost of unit is Rs. 2160000.00. At what sales volume, will the unit break even ? – 120000

54. The guarantor of a customer has the right – to be informed only about the extent of his liability

55. Loans/overdrafts to farmers against fixed deposits/Indira Vikas Patras etc. are to be classified as – indirect finance to agriculture

56. New private sector banks are required to have 25% of the branches in rural/semi urban areas

57. Custody of bill of lading is – when bill is submitted in the custody of the bank58. A NRI wants premature encashment of FCNR before one year. The interest rate will

be paid as follows: - no interest is to be paid if the deposit has not run for minimum prescribed period – i.e. one year

59. Overseas Banking Units are proposed to be exempted from – CRR; SLR and Priority Sector

60. Under ‘INCOTERMS’, the term “FOB” indicates – Free on board61. The statutory authority who control Trade Control is – DGFT(Director General of

Foreign Trade)62. Non- Resident Ordinary (NRO) accounts may be opened by means of – direct

inward remittance from abroad in an approved manner; by encashment of foreign currency notes/coins and foreign travelers cheques and by conversion of the existing resident accounts

63. For the visit to the following countries, a traveler is not eligible for any basic travel quota –Nepal and Bhutan

64. What do you understand by the word – “SION” ? – Standard input/output norms65. If the expiry date of a LC falls on a holiday the documents are to be submitted to the

negotiating bank – on the preceding working day66. If the letter of credit is silent about partial shipment or transshipment – both are

permitted67. Delayed renewal or review of a borrowal account from the due date would render

the account as NPA if the delay is 180 days or more

68. Section 19(2) of Banking Regulations Act 1949 provides that the bank cannot possess shares of any company as pledge, mortgagee or absolute owner, if – both the above limits are applicable, but whichever is less

69. Which section of the respective act covers the SLR ? – Section 24 (2A) of Banking Regulation Act – 1949

70. Abhinav endorses a cheque in favour of Bhawana and writes the words – “notice of dishonour waived” – it is a restrictive endorsement

71. The bill is drawn in Mumbai and is acceptable/payable in Chennai, but the drawee is at New York. The bill – is an inland bill

72. As per section 45 (ZA) of Banking Regulation Act, 1949 – nomination facility has been granted for bank deposits

73. As per section 20, 21 and 21A of Reserve Bank of India act 1934, Reserve Bank of India regulates flow of credit to economy by variations in SLR and CRR

74. ‘SEMFEX-I” pertains to – setting up of SSI units75. Rajarani – a Hindu lady after death of her husband marries Raj Kumar. Thereafter

Rajrani approaches you as a natural guardian of her son from earlier husband. Who will be the guardian? –mother

76. Under section 26 of Negotiable Instruments Act – a minor can draw, accept endorse and negotiate bills of exchange, promissory notes or cheques binding on all parties except himself

77. Persons who are not allotted PAN are to make declarations – using Form No: 6078. A balance sheet shows fixed assets, non-current assets and current assets as Rs. 30

lakhs. If there are no intangible assets and the long-term sources are Rs. 16 lakhs. What is the net working capital ? – Rs. 2.00 lakhs

79. On perusal of a balance sheet it reveals that the current ratio is 2:1. The net working capital is Rs. 100000.00. Arrive current liabilities:. - The current liabilities will amount to: - Rs. 100000.00

80. In a balance sheet, amount of total assets is Rs. 10 lakhs, current liabilities – Rs. 5 lakhs and capital and reserves – Rs. 2 lakhs. What is the debit equity ratio ? – 1.5:1

81. Total of liability side of a balance sheet is Rs. 16 lakhs, debt equity ratio – 2:1 and long-term liabilities of Rs. 8 lakhs. If current assets are Rs. 4.75, the net working capital will be – Rs. 75000.00

82. Profit to sales is 2% and amount of profits is Rs. 5 lakhs – Sales will be Rs. 250 lakhs

83. Contingent liabilities are those – which may arise or may not arise84. In assessment of working capital requirements, the operating cycle of the

business/industrial activity consists of which of the following period and processes ? – acquisition and storage of raw materials after deducting the period of credit allowed by the creditors; storage of finished goods before releasing them for sale and credit period allowed to debtors

85. On perusal of a balance sheet it is revealed that the current ratio is 3:1 and the net working capital is Rs. 80000.00. The current assets will amount to Rs. 120000.00

86. Credit limit for marketing of crops (pledge financing) for farmers has been raised from 6 months to 12 months

87. Committee on Camels Rating was headed by – S. Padmanaban88. The committee on rationalization of interest rates on small savings was headed by

– Y V Reddy89. What is “Right of redemption “ ? – on the repayment of the debt, the

mortgagor has the right to get back the mortgaged property90. The current ratio of a company remained constant for two consecutive years but

Quick Ratio decreased from 1.6:1 to 1:1. In the next year, which one of the following conclusions is certainly true based only on this data ? – Company’s stocks on a percentage of current assets have increased in the second year

91. Your branch has sanctioned a loan of Rs. 25000/- to Amit, who it was noticed later, was a minor. Shri Bhaman had guaranteed the loan. – Since Amit, being a minor, he is

not liable and as such guarantor is also not liable as his liability is co-existence with the principal debtor

92. ABC and Co have been sanctioned cash credit limit of Rs. 10 lakhs against paid stocks (margin-30%) and book debts upto 90 days (margin 50% with a submit of Rs. 2 lakhs. The company had stocks worth Rs. 20 lakhs. Sundry Creditors for goods Rs. 10 lakhs and book debts upto 90 days – Rs. 15 lakhs. How much amount can they draw against this security ? – Rs. 9.00 lakhs

93. In assessment of working capital requirements, the operating cycle of the business/industrial activity consists of which of the following periods and processing ? – Acquisition and storage of raw materials after deducting the period of credit allowed by the creditors and storage of finished goods before releasing them for sale

94. While analyzing the balance sheet of M/s Amar and co, you notice that long term uses are 120% of long term sources. Such a position would generally indicate – deterioration in current assets

95. The charge that the bank gets in respect of supply bills is – assignment96. Right of set off cannot be exercised by the bank in respect of – a contingent debt

like guarantees and letter of credits97. Special crossing means – any bank’s name with or without two parallel

transverse lines98. When a bill payable to Shri Yadav or order is endorsed by him adding words, “Notice

of dishonour not required” – such an endorsement is called – facultative endorsement99. The holder of a negotiable instrument is holder in due course if – he receives the

instrument in good faith and without negligence; he receives the instrument before its maturity and he receives the instrument for lawful consideration100.The correct endorsement on a cheque by Dr. Narayan Dutt is – Narayan Dutt(Doctor)

When the remission on stamp duty of a bill is available ?


01. When the remission on stamp duty of a bill is available ? – When a bill represents genuine trade transaction and when the usance period of the bill is not more than three months and when the bill is routed through banking channel

02. Endorsement is a signature of the maker or holder for the purpose of negotiation03. A Government promissory note is a negotiable instrument as per custom and usages04. A cheque is drawn for Rs. 50000.00 and the payee endorses Rs. 5000.00 in favour of

Madhumita. Madhumita can claim from the bank - no amount because parallel endorsement is invalid

05. An undated cheque is – not considered invalid or considered valid06. The function of Central Processing Unit – CPU is to read, interpret and process the

information and instructions07. On which one of the following securities, banker has a right of general lien – securities

remaining in his possession after the loan was adjusted08. Certificate of incorporation – provides conclusive proof that all the formalities

regarding the formation has been fulfilled by the promoters09. The following factors are to be examined while reviewing the Cash Credit Accounts

– whether the borrower is passing the entire business to the bank; whether prescribed margins are being maintained and whether there is an active turnover both in the account as well as in the stock offered as security

10. The following statements are true in respect of Allied agricultural advances – Interest is to be charged on compounded half yearly basis in September/March each year and no penal interest should be charged for loans upto Rs. 25000.00

11. Higher debtor turnover ratio means – problems in collection of debts12. Cash loss means – net loss before charging depreciation13. Nomination facility is available on deposit accounts opened by individuals14. Crossing of cheque denotes that – it should be paid to the banker only15. Negotiable instruments act had permitted the following – electronic cheques; truncated

cheques; digital signatures and application of Information Technology Act16. M/s Problem and company are maintaining a current account with your branch. A cheque for

Rs. 25000.00 drawn by them is presented through clearing which is duly passed and debited to their account. Subsequently, payment of the cheque is countermanded by the drawer the same day before the time of return of clearing cheques. What decision will you take in this situation ? – The drawer can stop payment before the expiry of time for returning unpaid cheques as per clearing house rules

17. If a minor is admitted in a firm for the benefits of a partnership, the bank will open the current account

18. On retirement of a partner, if the account is in credit balance – the firm continues and the branch must ensure that notices of retirement is obtained not only from the continuing partners but also from the retiring partners and then delete the retiring partner’s name

19. While opening the account in the name of the Public Limited Company, the bank should obtain along with account opening form – the memorandum and articles of association; the board resolution authorizing to open the account with the bank and the certificate of incorporation

20. A Hindu undivided family consists of all persons -lineally descended from a common ancestor

21. When court issues garnishee order, the bank is known as – garnishee22. Raman and Joseph go to a shop. Raman says to the shop keeper “Let Joseph” have the

goods, and if he does not pay, I will pay – Raman is liable only if Joseph fails to pay23. Purchase of plant and machinery – uses of funds24. Banking Ombudsman is appointed by RBI under Banking Regulation Act 194925. The currency chest maintained by a nationalized bank is in the capacity of – principal and

agent26. A and B maintain a fixed deposit account and also a locker and want to make nomination for

both the accounts – nomination can be made in both accounts27. Out of Sen award, Desai award, Shastri award and bipartite settlements, Sen award is not

applicable to award staff28. According to Rule 5 of Official Language Rules – reply of letters received in Hindi

should be given in Hindi only29. As per limitation act, the period of limitation for repayment of deposits by the bank is

– three years from demand30. Back to back letter of credit means – issue of letter of credit in domestic currency on

the strength of foreign letter of credit31. Which document will you call for in permitting removal of the contents of the locker in case

of death of the locker hirer who has not nominated anyone – letter of administration32. A term deposit receipt was originally issued in the name –Amit and Bhawana. Subsequently,

Amit’s name was deleted and Cumar’s name was added. Now, Bhawana has requested to delete his name and include Divya’s name. What would you do ? – Not to accept as RBI directives prohibit such a change

33. Which account is not attachable by service of garnishee order?- balance representing cheque sent in clearing, not yet cleared

34. The Credit Guarantee Fund scheme of SIDBI covers all fund based credit facilities35. Country risk(s) is/are – political, economic, social and cultural

36. Straight bill of lading is where goods specified in the bill of lading are consigned to a named person

37. Dunkel draft was – associated with Uruguay round38. In our country, Exchange Control is under the purview of Ministry of Finance39. TT buying rate is applied for inward remittance when our Nostro account has already

been credited40. Import licence indicates – Cost, insurance and freight (CIF) value of imports41. Under “FAS”(free alongside sales) terms – seller delivers the goods alongside the ship,

buyer to nominate carrier, pay the freight and provide export clearance42. If the letter of credit is silent about the revocability, the letter of credit is considered as

– irrevocable43. In a balance sheet, the value of fixed assets – Rs 1 lakhs, value of non current assets – Rs. 1

lakhs and value of total liabilities – Rs 4 lakhs. What is the value of current assets ? – Rs. 2 lakhs

44. If current ratio of an organization is very high but acid test ratio is low, it indicates that the firm has –very high stock level

45. Contingent liabilities are shown as footnote to the balance sheet46. If a company issues bonus shares, the net worth of the company – will not undergo any

change47. If a company issues rights shares, the debt equity ratio will have a change by

improvement48. Cyper law relates to – law relating to electronic media and telecommunications49. Nayak committee refers to advances made to small scale industry50. The term loan instalments payable within twelve months is shown in the balance sheet as

– current liabilities51. Raman purchased a draft favouring Krishnan, but has misplaced the draft in his office.

Krishnan approached you for issue of a duplicate demand draft furnishing good sureties. What would you do ? –Duplicate draft will be issued only to Raman (the purchaser) and not to Krishnan

52. What will you do in case any damaged/tampered parcel is received ? – open delivery of the parcel will be asked for

53. In the case of Hindu Undivided family, the following is not true – In the case of joint family business every member born in the family becomes a coparcener in the family business

54. In the case of hindu undivided family, the following are considered true – Joint Hindu family is not dissolved by the death of coparcener; in the joint family business only the manager or Karta has authority to incur debts; the karta alone can operate the current account of Joint Hindu Family and any representative appointed by the karta may also be permitted to operate the H U F account

55. Revenue stamp of what value is to be affixed in respect of receipt for Rs. 500.00 ? – Nil56. Who can stop payment of a cheque ? – the drawer57. A cheque is drawn “Pay Ramkumar” without the words “or order” or “bearer”. Such an

instrument is transferable and negotiable by the payee58. The reforms process in the financial sector in India was on the basis of Narasimhan

Committee recommendations59. Which of the following are eligible for refinance from SIDBI ? – All term loans and all

working capital advances under single window scheme60. An attestation is required in respect of which of the following documents ? – Mortgage

deed61. Net working capital means – current assets minus current liabilities62. Securitisation is related to recycling of funds63. For making payment of a fixed deposit of Rs. 5000.00 customer’s discharge should be

obtained on a revenue stamp of – Rs.1.00

64. When can claim in respect of a fixed deposit receipt become time barred ? - the claim becomes time barred three years after the date of presentation for payment by that depositor

65. The following are not negotiable instruments – a postal order; life insurance policy; a share certificate; money order

66. Restrictive endorsement is one in which endorser restricts the negotiability in future67. A cheque may be – ante-dated; post-dated and undated68. Protection is available to the collecting banker under section 131 of the Negotiable

Instruments Act, 1881 in respect of – crossed cheques69. When a cheque is crossed specially to more than one banker, the drawee bank can pay the

amount of the cheque to – the bank who is acting as agent for collection70. Section 31 of RBI act 1934 specifically prohibits issue of promissory notes, bills of exchange

and demand drafts (other than cheques on a banker) payable to bearer on demand because – these instruments issued payable to bearer on demand will virtually amount to currency notes and in India issue of currency is confined to RBI – the central banker

71. Section 85(1) of the Negotiable Instruments Act, 1881 provides protection to the paying banker in respect of – forged endorsement

72. To open an account of a partnership firm, the firm need not be registered73. On admission of a new partner in the firm with a credit balance, a new partnership letter has

to be obtained and operation to be allowed in the account as per the new mandate74. A company is said to be registered when it gets – certificate of incorporation from the

registrar of companies75. A Co-parcenor is – a minor male in the Hindu Family76. When a “Garnishee Nisi” is served, the banker should stop operations in the judgment

debtor’s accountupto amount mentioned in the garnishee order and allow the operations for the balance amount

77. A loan sanctioned to a minor has been guaranteed by Zeeba. Minor fails to pay – should forego the loan as minor is not competent to contract and the contract entered into with a minor is void

78. Registration of mortgage is compulsory- except mortgage by deposit by title deeds – if loan amount is Rs. 100.00 and more

79. A mortgage deed being executed is required to be attested by – two persons80. For execution of a decree, the following cannot be attached – Personal ornaments, which

as per religious usage cannot be parted with by any women; books of accounts; the wages of labourer and domestic servants and all monies payable under the policy of insurance on the life of judgment debtor

81. Banking Ombudsman scheme is applicable to the business of – all scheduled commercial banks including Regional Rural Banks

82. The provisions available in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest act, 2002 to form the Securitisation Co. – No Securitisation Reconstruction Co shall commence business without taking registration from Reserve Bank of India; Must have the owned funds of not less than two crore rupees; directors of Securitisation Co have adequate professional experience in matters related to finance, securitisation and reconstruction and that any of its directors has not been convicted of any offence involving moral turpitude

83. The reason for taking a letter of continuity in a cash credit or overdraft account is to provide continuity to demand promissory note within the overall limitation period of three years and to make the document valid, irrespective of the account fluctuating between debit and credit balances

84. A document executed for loan to a company – must be executed with the company’s common seal; on behalf of the company and by the authorized official

85. The stamp duty payable on an instrument will be at the rate prevailing at the place where the document is executed

86. The bank sanctioned a loan for Rs. 30 lakhs and for that mortgage deed was registered with the Registrar of assurances. The stamp duty on the mortgage deed is for fixed amount and advalorum

87. A foreign bank is one which has been incorporated outside India88. A bank maintains a trust account with Zutsi , a trustee and Yuman as beneficiary. Zutsi

wants to make nomination in the account – it cannot be allowed because it is not individual’s account

89. After the death of the accountholder bank is bound to inform the nominee – if for six months nominee does not turn-up in deposit account and if for three months nominee does not turn-up in case of locker account

90. Under which rule/act parliamentary committee on official language has been constituted – Section 4 (1) of Official Language Act

91. A person informs you about loss of his fixed deposit receipt and requests you to issue a duplicate fixed deposit receipt. How will you handle the request ? – The bank will issue duplicate fixed deposit receipt on the customer’s executing the bank’s standard stamped letter of indemnity. A letter intimating loss of the original deposit receipt and request for issuing duplicate receipt is obtained. One or two acceptable sureties are also accepted, each good for the amount

92. How is a foreign spouse of NRI treated for the purpose of opening an NRI account ? – as a person of Indian origin

93. What are the strengths of a Self Help Group organization ? – promotion of thrift and savings; practitioner of mutual help; propagation of voluntarism and purveyor of development of credit

94. What are the weaknesses of a Self Help Organisation ? – Super Profit orientation95. Which rate will be applied while negotiating bills under letter of credit ? – Bills buying96. RBI has prohibited stapling of currency notes by a directive issued under – Section 35A of

Banking Regulation act97. Short Bill of lading - which does not contain printed memorandum on reverse of

detaining the terms and conditions of the contract of carriage98. A person resident in India means a person who resided in India for a period of 182

days during the previous financial year99. Overseas Banking Units can be established in – Special Economic Zones

100.A NRI wants premature encashment of FCNR before one year. – No interest is to be paid if the deposit has not run for minimum prescribed period – i.e. one year

What is the risk weight of a non performing asset purchased by one bank from another bank?

BANK EXAMINATIONS – GENERAL ASPECTS = PART:: 05

01. A non performing asset has been purchased by a bank from another bank. What will be the risk weight for the purchasing bank for this account – 100%

02. For making reference under CDR II, consent of banks or financial institutions is required. What is the rule in this regard ? Consent of 75% of lenders by value and 60% by number is required

03. Hypothecation which creates equitable charge has been defined in – Sarfaesi Act04. Real Time Gross Settlement - RTGS takes care of which types of risks: Systemic and

settlement risks05. A bank can sell its NPA account to another bank only after keeping the same as NPA in the

books of the selling bank for atleast 24 months

06. When only the image of the cheque is sent to the paying bank while sending the cheque for collection instead of sending the physical cheque, the process is called – Cheque truncation

07. What is the maximum amount of loan, other than Housing loan to SC/ST that can be granted to Differential Rate of Interest - DRI beneficiary: Rs. 15000.00

08. A cheque partly written in English and partly in Regional language is presented for payment. What should the bank do ? If the language is regional language of the area and if cheque is otherwise in order, it can be paid

09. Money deposited after receiving order may be attached in the case of – Attachment order10. Original and duplicate draft presented simultaneously for payment – duplicate should be

paid and original should be returned11. Maximum time within which reply must be given under Right to Information Act: – 30 days12. A cheque signed by the agent is presented for payment after his death. .What should the

bank do ? –The cheque will be paid if it is otherwise in order13. Photographs in accounts are to be taken as per recommendations of which

committee: Ghosh committee14. What is the target for SC/ST under DRI – 40%15. Selling rate of currency is higher than traveller cheque because – Holding cost of

currency is high16. A minor was given a loan. On attaining majority, he acknowledges having taken loan and

promises to pay. Whether the loan can be recovered? – He cannot ratify the contract. Hence recovery is not possible.

17. Reserve Bank of India issues fresh notes in place of defective notes in bundle and they are called as Star Series Notes

18. Directors powers are mentioned in – Articles of association19. A loan was sanctioned against a vacant land. Subsequently a house was constructed at the

site. What security is available now? – Both20. A and B jointly are liable for debt. When the limitation period is approaching, A

acknowledges the debt while B was away from India. Limitation expires before B comes to India and after the arrival of B to India, he denies acknowledging the debt. On whom the bank can proceed for recovery of the loan as per limitation act – Both

21. On repayment of debt of a company, satisfaction of charge should be filed with the Registrar of Companies within which period – 30 days

22. A person returned from foreign trip has to surrender the foreign currency within – 180 days23. A loan was given on hypothecation of stock to Mr X. What has to be done ? – The dues will

be adjusted24. Club account – Cheque was signed by the secretary and he died. Whether it is payable ? – it

will be paid if it is not dated subsequent to date of death25. Company is in liquidation. Funds are at the hands of – Liquidator26. Sub Prime Crisis means – Problem created by lending to borrowers not meeting the

credit rating criteria27. The bill is dated: 15.03.2005 and the date of acceptance is 20.03.2005. The bill was

returned unpaid on 25.03.2005. The limitation period will be available upto 25.03. 2008

28. Under hypothecation, the possession and ownership remains with – both with the borrower

29. A lady has taken a demand loan against FD and comes to the branch and wants to add the name of her minor son as joint accountholder. What has to be done ? – After closure of loan only we can add the name

30. Discontinuation of service area approach is as per recommendations of – Vyas committee31. Revival of limitation for recovery of a time barred loan is possible by – Obtaining fresh

promise to pay under provisions of Indian Contract Act32. Other than a bill of exchange or promissory note, the document received from abroad is

required to be stamped within – three months

33. Administrator is appointed in the case of – where the deceased has left assets for legal heirs and there is no will

34. A company has registered office at Mumbai, loan granted at Bangalore, property situated at Delhi. EMT can be created at – Mumbai, Bangalore or Delhi if these are notified centers by respective State Governments

35. A having savings bank account with you deposited Rs. 25000.00. A public prosecutor sent notice to the bank informing that Mr A is involved in forgery and requested not to permit withdrawal in the account. In between, one cheque for Rs. 20000.00 is presented for payment. What will you do ? – Pay the cheque as Public Prosecutor is not authorized to freeze the account

36. There is a savings bank account in the name of A and B. They have given power of attorney to C for operation in the account. The cheque signed by C is presented in the bank after the death of B –Cheque will not be paid

37. An appeal (under Sarfaesi) against an order of DRT can be preferred by the debtor by depositing –50% of the amount which can be reduced to 25% by DRAT

38. Through Reverse Repo – RBI squeezes liquidity in the system by sale of Government Securities

39. Factoring refers to – Purchase and management of receivables40. A facility was granted to B on guarantee of A. At the time of giving guarantee, account was

overdrawn, which was not known to the guarantor. Later on the account turned out to be bad.Guarantor is liable

41. Reservation for women under SGSY – 40%42. No writings on currency notes – directions were issued by RBI under Section 35A of

BR act43. Garnishee order is not applicable on – Unused cash credit or overdraft limit44. A cheque is written in different hand writings and in different inks. It will be paid45. Appeal against the award of Ombudsman can be made by the bank within – 30 days of

receipt of acceptance from the customer46. In the case of dishonour of a cheque due to insufficient funds, for enforcing rights under

section 138 of the Negotiable Instruments Act, the holder should send a notice to the drawer within – 30 days from the date of receipt of notice regarding dishonour of the instrument

47. The police seeks information regarding conduct of an account being maintained in your branch in connection with some investigation. Can the bank pass on the information ? – Yes. If the information is asked by an official of the bank in charge of Police Station or above and in writing

48. Who can not be a partner in a partnership firm ? – A Hindu undivided family49. The limitation period will start from the last date i.e. when the document was executed

by the last partner50. Who is the appellate authority for making appeal against the decision of a Banking

Ombudsman in India ? – Deputy Governor, Reserve Bank of India.51. A and B have a locker with the bank which can be operated by either or survivor. A reported

loss of key. Next day B comes to operate the locker. Whether operation will be allowed ? – No

52. What is the status of the nominee ? – Trustee of legal heirs53. Star series notes relates to – replacement of defective notes which were wrongly

printed54. If a cheque written in different inks is presented for payment, what should the bank do ?

- The cheque can be paid if it is otherwise in order55. A cheque in which the word – “Hyderabad” written between two parallel lines is presented

for payment in clearing in Delhi. Can this cheque be paid in Delhi ? Yes. Since this is general crossing and place mentioned in parallel lines makes no sense

56. The complainant can make appeal against the award of Ombudsman within – 30 days of the receipt of the copy of award

57. A crossed cheque has been presented by the collecting banker on the counter for cash payment. Whether cash payment is permitted ? Yes. Bank can pay the cheque as the requirement is that the crossed cheque should be paid through a bank

58. In case of wrongful dishonour of the cheque, the bank will be liable to the drawer of the cheque

59. A cheque for Rs. 6000/- was presented for payment. The balance in the account was Rs. 5000/- . After enquiry from the counter clerk, the presenter deposited Rs. 1000/- in the account and the cheque was paid. The customer claims the amount from the bank. What will be the bank’s position ? The bank is liable for disclosing secrecy of a customer’s account

60. RTGS has been started to minimize settlement and systemic risks61. Cash Reserve Ratio has been defined in Section 42(1) of the RBI act62. In the context of collection of cheques, conversion means crediting the amount of the

cheque to the account of the person who is not entitled to it63. Who can stop payment of the draft ? – None64. Banks cannot issue demand drafts payable to bearer, under which act ? – No impact as

provisions relating to crossing are not applicable to bill of exchange65. If a borrower is not satisfied with the reply of the bank to the representation regarding

action taken by the bank under SARFAESI act, he can make a representation to DRT without depositing any amount.However, if he wants to appear against the decision of DRT, he is required to deposit minimum 50%

66. What is the relationship between the banker and judgment debtor against whose accounts garnishee order is received ?– Debtor-creditor

67. When a LIC policy will acquire surrender value ? – after three years from the date of commencement of the policy provided premium has been regularly paid

68. When a borrower claims his mortgaged property after repayment of loan, the right is called – Right of redemption

69. A wants his account operated by B but only after his death. The account to be operated in the form of –former or survivor

70. What percentage of profit is transferred to statutory reserves by banks before declaring dividend and bonus- 25%

71. The period for which notice is to be issued to the borrower under SARFAESI act – 60 days72. The effect of increasing CRR by RBI is – controlling liquidity73. On what rate, the RBI rediscounts the bills discounted by banks ? – Bank Rate74. RBI has recently permitted Door Step Banking Services under which act? – Banking

regulation act 194975. Islamic banking means – accepting the deposits without payment of interest and

lending without collecting any interest76. Forged draft received for payment. Which bank will inform the police ?- Paying banker77. Trustee came to the bank for loan against fixed deposit to meet the urgent needs of the

trust. But the trust deed is slient about loan against FD. Can we give loan ? – No78. Frauds of above Rs. 1 crore is to be reported to (where there is no staff involvement) – CBI –

Economic offence wing79. Customer is not ready to sign on the backside of the cheque. How to proceed ? – Obtain

stamped receipt80. Drawer arrested – Public prosecutor requests for stop payment. Will you oblige. No. We will

pay the cheque81. Revenue stamp on receipt is to be affixed for cash payment. More than Rs. 5000.0082. Guarantor pays the dues of the borrower. He is entitled to the rights of creditor. This right is

called –Right of subrogation83. Under section 138 of Negotiable Instruments Act, what is the maximum

punishment ?. Double the amount of cheque or imprisonment for two years or both84. Under Right to Information act, the information has to be furnished within – 30 days85. The difference between interest earned by a bank and interest paid by the bank is called

– Net Interest margin

86. The consequence of non registration of partnership is – it cannot sue others for recovery of its dues

87. An account was opened on 01.12.2007 and the cheque book was issued on 10.12.2007. Two cheques dated: 07.12.2007 and 18.11.2007 were presented for payment on 15.12.2007. What should the bank do ? – Both cheques will be paid if thery are otherwise in order

88. There is an account in the name of A. A post dated cheque was paid in clearing by mistake and as a result another cheque was dishonoured due to insufficient funds. What is the liability of the bank ?.Bank cannot debit the post dated cheque before the date of the cheque and would be liable to the drawer and (not payee) for wronglful dishonour of the cheque

89. A executed a power of attorney in favour of B. The bank has received information about the death of A – the principal. A cheque signed by Mr. B which is dated prior to the death of A has been presented for payment. What should the bank do ? The bank will not pay the cheque as the authority comes to an end with the death of principal

90. In an account a cheque with forged signatures was passed because the forgery was done in such a way that the same could not be detected despite best efforts. Thereafter, the bank had sent the statement of the account to the customer who did not object the debit. Later on he contests the debit. Under the circumstances, what is the liability of the bank ? – The bank shall be liable as a cheque with forged signatures is nullity in law

91. What is the responsibility of legal heirs for the debts ? - They are liable to the extent of assets inherited by them

92. If a depositor other than senior citizen desires that TDS should not be deducted from interest payable on term deposit, he will be required to submit a declaration vide– Form 15G

93. A minor can be granted loan for – necessities of life as per his status94. A bill of lading is treated as stale if it is not presented to the negotiating bank within 21

days from the date of its issue95. Inspection of banks by RBI is done under Section – 35 of Banking Regulation act 194996. In the call money market, lending and borrowing is done for – overnight97. In which type of accounts nomination facility is not permitted ? – Safe custody accounts

in the name of more than one person98. The limitation for TOD is – three years from the date of loan99. Hypothecation has been defined in – Section 2 of SARFAESI act 2002

100.As per KYC guidelines of RBI - ration card is not treated as proof of identify of an accountholder

How the prepaid expenses in the shape of share premium are classified in a balance sheet?


01. Prepaid expenses in the shape of insurance premium are classified in the balance sheet as – current assets

02. The borrowing powers of the board of directors of the Public Limited Company should not exceed: Paid up capital and free reserves

03. State sponsored corporation granted loan for on-lending to weaker section is covered by the bank under – Indirect advance to agriculture

04. Hypothecation has been defined in Section 2(n) of Sarfaesi Act05. In a cheque drawn by the drawer, the name of payee is written in English and the other

parts in vernacular language. The cheque will be paid if it is otherwise in order

06. Right of subrogation is – guarantor stepping into the shoes of the creditor or discharging the liability of the principal borrower

07. The objective of Government Sponsored Swarna Jayanthi Gram Swarojgar Yojana – SGSY is – to raise individuals/groups of rural poor above the poverty line over a period of time

08. Account payee crossing is not defined in any act including Negotiable Instruments Act 1881

09. In computers, booting refers to – Powering the computer and loading in operating system

10. On receipt of a forged Rs. 500 note the note and the statement from the applicant would be sent to the Police

11. In the case of wrongful dishonour of a cheque by the bank, the bank is only liable to the drawer as the privity of contract is between the bank and the drawer who is the accountholder

12. Under Section 148 of Indian Contract Act, bailment refers to delivery of goods from one person to another person for some purpose and when the purpose is over, goods will be returned or disposed off as per the directions of the delivery - ie bailor

13. Global Trust Bank merged with Oriental Bank of Commerce14. The objective of Know Your Customer guidelines are – to prevent banks from being used

unwittingly by criminal elements for transfer of illegal funds/money laundering activities

15. IRDA refers to Insurance Regulatory and Development Authority , for regulating the insurance sector

16. Preferential payment to depositors in respect of winding up of a banking company is provided underSection 43 A of Banking Regulation Act, 1949

17. National Housing Bank is an apex Institution dealing with the housing finance exclusively

18. For declaration of dividend by a bank, without reference to RBI the capital adequacy ratio should be at least 11% for preceding two completed years and the accounting year for which the bank proposes to declare dividend

19. Interest in cash reserve ratio is payable on monthly basis at 3.5% eligible balances20. The keyboard, mouse, touch pad are input devices in a computer21. The cooperative bank which has changed its name to a private bank is – Development

Credit Bank22. Exchange Control Department is now called as – Foreign Exchange Department23. World elder’s day is celebrated on 1st October each year24. Current Ratio of 0.85 implies – negative net working capital25. Committee on legal aspects of bank fraud is headed by Dr. N L Mitra26. The maximum extent of foreign direct investment in public sector bank is 26%27. A depositor who has opened his recurring deposit account on 10th day of a month - can

deposit his monthly installments on any day during a month28. The risk weight for housing loan been increased to – 75%29. Repo transaction refers to: Inspection of the liquidity by RBI under liquidity adjustment

policy30. A 65 year old depositor requests you not to deduct TDS at source. He has to submit the

request in Form: 15H31. NABCONS means – NABARD Consultancy Services32. Negative lien is a declaration given by the company that the assets given for creating

charge is owned by it and there is no change of any bank on it33. The formula for calculating breakeven point in terms of units is – Fixed

Costs/Contribution34. Risk arising out of mismatch in maturity payment in assets and liquidity is known as

_ Liquidity Risk35. S.K. Tudeja Committee is associated with: Sugar Industry

36. The ceiling for referring cases for recovery of Lok Adalat - Rs. 20 lakhs37. Cheque Truncation refers to – A process in which a cheque is truncated during the

course of a clearing either by the clearing house or by the bank whether paying or receiving payment immediately on generation of electronic image for transmission substituting the cheque for further movement in writing

38. CDR mechanism is applicable in the case of borrowers having multiple banking exposure of Rs. 20 crore and above.

39. Matured but not paid term deposits are treated as – demand liability40. While opening a current deposit account of a partnership firm, banks generally insist for

declaration of partnership in the prescribed form41. The relationship between banker and customer in the case of safe deposit vault transaction

is that of –Lessor/Lessee42. One of the trustees of a trust maintaining an account with your bank is adjudged as

insolvent. A cheque signed by him was presented through clearing after you received the notice of insolvency of the trustee. What will you do ? – The cheque can be paid safely

43. Loss before charging depreciation is known as – cash loss44. In a foreign exchange transaction, a right but not the obligation to buy or sell is

called – option45. For technological upgradation in banking system, which of the following committee has

been set up ? -Safar Committee46. A usance bill is accepted by the attorney of the drawee. Subsequently, the drawee revokes

the power of attorney before the bill is due. What will you do in this case ? – It is deemed to be accepted by the drawee and he is liable

47. As per RBI guidelines, there should be how many working directors in a public sector bank ? – Two: Chairman and Managing Director and Executive Director

48. On receiving a notice of death of Karta, the credit balance of hindu undivided family(HUF) current account will be operated by the senior most coparcener called as karta

49. Not negotiable crossing is a caution to – endorsee50. M/s Impex Private Limited, an exporter having a satisfactory current account approaches

you and seeks your guidance about an export order which he has received from USA for export of garments. On scrutiny of the export order, you observe that there is a clause that Letter of Credit will follow in due course. He enquires from you as to which type of LC is safest from the point of view of exporter. –Irrevocable letter of credit.

51. Mr Taj Pratab Singh, a sole proprietor of M/s Impex Private Limited – an exporter having a satisfactory current account approaches you and seeks your guidance about an export order, which he is negotiating with an importer from USA. He seeks guidance as to which type of LC he should insist which will assure him that some preshipment advance is made available at the instance of importer – Red Clause Letter of credit

52. Deposit accounts which have not been operated for more than 10 years are called – Unclaimed accounts

53. Return of unclaimed deposits is required to be submitted to RBI under which act – Section 26 of Banking Regulation Act 1949.

54. On scrutiny of a balance sheet of M/s Techno Inc, you observe that the long term uses of funds are more than long term sources. The position of the balance sheet indicates – Negative net working capital

55. On scrutiny of a balance sheet of M/s Thomas Inc. you observe that the short term uses of funds are more than short term sources. The position of the balance sheet indicates – positive net working capital

56. Committee on Procedures and Performances Audit and Public Services – CPPAPS is headed by – S. B. TARAPORE

57. Mrs. Raja Rani, aged 80 years having a fixed deposit for Rs. 2 lakhs approaches you with the request to add the name of his son so that he does not face any problem after her death. You observe that she has raised a loan against the said FDR. How will you handle the request of the lady? – The lady will be advised that the request can be accepted on closure of loan only

58. Your branch has disbursed a term loan – documents executed by Master Bobby to meet his education expenses, which was guaranteed by his father. The loan account became irregular and despite repeated reminders, Bobby or his father did not regularize the term loan account. The loan officer approaches you for guidance regarding the course of action, which the bank can undertake. –Loan cannot be recovered from the borrower or the guarantor, as the contract with the minor is void.

59. Master Vinay aged 16 years has a term deposit of Rs. 10000.00 with your branch which is to mature after three years. He approaches you with a request to either allow loan against the deposit or make the pre-mature payment of term deposit. How will you handle the request of Master Vinay ? – Loan will not be allowed to the Master Vinay since he is a minor; however, premature cancellation can be permitted.

60. Mr. Somnath maintaining a satisfactory current account with you issues a cheque for Rs. 10000.00 in favour of the supplier - Mr. Samsung. He endorses it in favour of Mr. Lever and he deposits the cheque in his bank for collection. The cheque is presented in clearing at your branch but due to oversight, the cheque is wrongfully dishonoured . Your branch receives a notice from Mr Lever for wrongful dishonour and demands payment and also claims damages. How will you handle the notice? –In the case of wrongful dishonour of a cheque, the drawee banker is liable for damages to the drawer only. As such Mr. Lever has no legal ground to serve the notice to the bank and demand the payment.

61. The Narasimhan Committee Recommendations include – Permitting Regional Rural Banks for all types of banking business; rationalization of foreign operations of all banks, giving authority to public sector banks for recruitment of officers and setting up of asset reconstruction fund to take over bad and doubtful debts of the banks

62. Regional Rural Banks are managed by – State Government63. Banks are required to prepare balance sheet in the prescribed format as per – Section 29

of Banking Regulation act 194964. A minor not domicile in India will attain majority – on completion of the age as per the

law of the place of the domicile65. As per Section 105 of Negotiable Instruments Act, reasonable time is to be determined for

presentment for acceptance or payment of Negotiable Instruments while determining such period –Public holidays and Sundays will be excluded

66. Bill of exchange will be treated as dishonoured, when the drawee makes defaults in acceptance;where one of the drawees out of several drawees does not accept the bill; where the drawee is incompetent to contract and when the acceptance is qualified

67. Negotiable Instrument payable on demand must be presented within a reasonable time68. The starting point of limitation period on a bill of exchange payable on demand is – the

date of the bill69. Bank obtained the agreement of hypothecation on 1.1.2005 and upto what time, the bank

can file a suit ? – 01.01.200870. Sarfaesi Act, 2002 is not applicable in the following cases – any security interest not

exceeding Rs. 1.00 lakh; any security interest in agriculture land; pledge of movable as per Section 172 of Contract Act and Rights of unpaid seller under Section- 47 of Sale goods act

71. The members of debt recovery tribunals are known as – public servants72. Validity Period of equitable mortgage is – 12 years73. Accumulated losses are to be classified as fictuary assets74. The repayment capacity of a borrower for a term loan is calculated by – debt service

coverage ratio75. Silviculture is known as cultivation of trees76. The gilt edged securities are known as – government securities77. One basis point implies – 0.1%78. Export bill if not paid on due date will be crystalised on 30th day after notional due date

79. RAM stands for – Random Access Memory80. Demat stands for dematerialization and remat stands for rematerialisation81. The following are hedging instruments – Futures; Interest Rate futures; Currency

future; Stock index futures82. At whose request, letter of credit is opened by the bank ? – Buyer or importer83. In which type of letter of credit, apart from provision for allowing pre-shipment credit,

issuing bank has also to arrange for storage/farmhouse facility prior to shipment on board – Green Clause letter of credit

84. Under the concept of Offshore Banking Units, minimum capital for starting the operation provided by the payment bank would be: US dollars – 10 million

85. What is the target under priority sector for Foreign Banks for SSI within the overall target of 32% ? -10% of net bank credit

86. Priority sector target for Regional Rural Banks has been fixed at – 60%87. First annual general body meeting must be called within a period of – 18 months after the

date of incorporation of the company88. If annual general body meeting is not called for by the company within the prescribed

period, each officer of the company shall be punishable with a fine of Rs. 50000.0089. Networth of the company is the sum total of paid up capital and free reserves. Free

Reserves means all reserves created out of profits and write back of depreciation provisions

90. Holding Company means –the company which holds shares of another company of value of more than half value of equity share capital

91. If a company wants to change its name the procedure to be followed – conduct a special meeting of the general body and arrive a resolution and get approval of Central Government

92. Certificate for registration of charge is issued by the Registrar of companies under Section 132 of the companies act

93. SARFAESI act 2002 contains the provisions for filing the appeal before DRAT by the borrower for which he will have to deposit – 50% of the claim amount

94. The drawee of the cheque always is – the paying banker95. In terms of autonomy, stronger banks mean – banks that have made profits for last

three consecutive years; having capital adequacy ratio of 9% or more; having net NPAs of less than 4% and having a minimum owned funds of Rs. 300 crore

96. Under autonomy package, banks would be allowed to prescribe standards for categorization of branches; they will have the power to lay down the educational standards for recruitments and promotions; it aims to remove the fears among banks officials on their being haunted by the investigating agencies on commercial decision taken in good faith and senior bank officials are permitted to undertake foreign tours for business promotion

97. A contract about Foreign Trade Policy means – It is for a period of five years; along with the main annual policy supplement announced every year and board of trade is headed by an eminent business person

98. Current accounts are permitted to be opened by executors, administrators, liquidators and trustees also

99. Current account can be opened by any person or institution100.Ration card should not be insisted by the bank for identification of the depositor as per KYC guidelines

With whom an appeal against the decision of DRT has to be made?


01. Appeal against the decision of Debt Recovery Tribunal can be made before the Chairperson of DRAT within a period of 45 days

02. If a document duly stamped in Delhi travels to Jammu and Kashmir state, additional stamps equivalent to full stamp duty of Jammu and Kashmir state are required to be affixed

03. In case a borrower signs in a vernacular language, a banker must obtain a duly witnessed certificate that the contents have been read out and explained to the borrower in vernacular language and the borrower had understood the same

04. One rupee notes are issued by Government of India05. Borrowing powers of a company are mentioned in the articles of association06. A certificate of deposit is issued by a bank at a discount to face value07. FIMMDAI means Fixed Income Money Market and Derivative Association of India08. Chairman and Managing Directors of nationalized banks are appointed by Central

Government09. Hardware refers to – any part of computer that is physically visible10. Special Purpose Vehicle mechanism is suggested for divestment of Government’s

stake in Public Sector Unit11. Debt Service Coverage Ratio shows the number of times the company’s surplus

generation covers the payment of interest and repayment of principal of long debt

12. The high level committee set up by the finance ministry to review the system of administered interest rates in the country – Y V Reddy Committee

13. Under the Corporate Debt Restructuring called as CDR, the floor limit of aggregate exposure is Rs. 20 crore

14. In the case of securitization, the number of loans are put together and then distributed among small investors

15. A NRE depositor has issued a power of attorney in favour of his wife – a resident. She can withdraw cash, issue cheques-crossed for local payments and deposit into the account a foreign DD favouring the deposit, however, she cannot deposit foreign currency notes/foreign traveler cheques

16. The maximum period allowed for FCNR deposits is- three years17. Foreign citizen of Indian origin is a Non Resident Indian – NRI18. Tier II capital should not exceed 100% of Tier I capital19. A letter of credit in which the terms and conditions cannot be amended without the

agreement of opening bank, applicant and the beneficiary is called – Irrevocable letter of credit

20. Bill of lading is a document signed by the captain of the ship- acknowledging of receipt of goods on boarding the vessel for shipment

21. Trade Related Intellectual Property Rights (TRIPS) and Trade Related Investment Measures (TRIMPS) are associated with – Dunkal Proposal

22. The import licences are issued by DGFT called as Director General of Foreign Trade23. Montreal Protocol relates to Protection of ozone layer24. The term “ holder” – refers to the person who is in possession of the instrument

legally and entitled to possess the instrument in his own name and recover the amount thereunder

25. An executor of a will has expressed his inability to accept the responsibility. On reference to the Court, a person is appointed to look after the affairs and the person is called Administrator

26. Recovery certificate issued by the president of Debt Recovery Tribunal is routed through Recovery Officer

27. If the bank fails to register the hypothecation charge on the Current assets of a company within 60 days of creation of the charge, the matter has to be referred to – Company Law Board

28. A guarantee was issued on behalf of Rohit by exercising a lien on the Fixed Deposit Receipt of Rohit. Bank is informed about the death of Rohit. A garnishee order is received attaching

the deposit of Rohit. The bank will attach subject to bank’s right of set off against any debts owed by Rohit

29. A loan has been granted to Rahul against the security of his Fixed Deposit Receipt – FDR, with the branch. Subsequently, a Court attachment order is received on the deposit. The branch after adjusting the dues/outstanding towards the bank has to pay the balance amount to the court

30. Registration of charge is not necessary when the company has been granted loan facility against the security of fixed deposit

31. The bank receives garnishee order. The relationship between the banker and the customer in this case is debtor /creditor

32. The bank due to oversight pays a forged cheque and the bank is liable to the drawer of the cheque

33. The bank while disbursing the loan did not stamp the promissory note for the appropriate value. The options for the bank is that unstamped/understamped promissory note cannot be rectified

34. A minor aged 15 years comes to your branch for payment of a cheque for Rs. 27000/-. The signature of the drawer tallies with your record. As a desk officer, can you make the payment ? – Yes, the minor cannot be denied taking payment

35. As per the amendment of the Negotiable Amendment Act in December, 2002, the time period available to the holder of a cheque to give notice of dishonour to the drawer is 30 days

36. As per the Negotiable Instruments Act, the notice period by the holder to the drawer under Section 138 is 15 days

37. Kelkar Committee has suggested that tax incentives for housing loans be withdrawn as part of the overall revamp of tax policy

38. In the case of a garnishee order, where the partner of a firm is a judgment debtor, only his personal account can be attached and not the firm’s account.

39. The following statements are true in connection with the right of set-off with regard to bank – It is the bank’s discretion to exercise right to set-off and the whole bank constitutes one entity and it is applicable when the banker- customer relationship is that of debtor-creditor

40. When a bill is drawn in a set of three and the third is presented for payment – it can be paid

41. The provision requirement for substandard assets – 10% of net book value42. Claused bill of lading is one which narrates the effective condition of the

merchandise or packing or both43. Non resident Indian can maintain – Non Resident External Account, Non Resident

Ordinary deposit account, FCNR account and Non Resident fixed deposit account44. Composite cash credit system with liquidity for agriculture has been introduced on the

recommendations of R V Gupta Committee 45. Rohit Mehta (apparent age-14) presents a cheque drawn by his father Amit Mehta for

payment – it can be paid as the minor is not made liable in this transaction46. Certificate of noting issued by Notary Public is known as Protest47. Break-even-Point is a point where the total costs equal to total revenues48. A police inspector informs you that Thomas is facing a charge of cheating and is involved in

illegal export of persons abroad. He produces a letter signed by the station-in-charge demanding that details of the account of Thomas facing charge of cheating be disclosed. How will you handle the situation ? –As the inspector has produced an authorization letter we will allow him to inspect the books

49. If debt service coverage ratio is 2, it means – loan repayment can be easily made by the borrower

50. A minor attains majority on completion of 18 years51. “Bank does not recognize trusts” – it means that in the absence of any specific

information, deposit accounts will be presumed to be the property of the accountholder

52. Financial assistance for the activity, which is not considered indirect finance to agriculture is – Agro clinics

53. Executor is a person named in the “Will” to manage the properties of the deceased54. Holder does not get protection, if endorsement is forged55. If on any cheque, bearer or order has not been written then it will be treated as – an order

cheque56. Mumtaz endorsed a cheque in favour of Dara Singh with the condition – “Pay to after death

of Rohan Kapur”, but received the payment without fulfilling the condition. In this case from whom can Mumtaz recover the amount – From Dara Singh

57. Abhinav is the holder of a cheque who endorses sans recourse to Thomas and Thomas to Raman and Raman to Divya who endorses it to Selvi. The cheque is dishonoured – Selvi can claim the amount from Thomas, Raman and Divya

58. Account Payee crossing is addressed to the collecting banker59. Minor wants to overdraw in his account and you will not grant it because the contract

with a minor is void abinitio (the contract is not valid)60. The maximum number of members in a Private Limited Company, should not exceed – 50

as per Indian Companies Act 195661. A Hindu Undivided Family is managed by – the karta62. Garnishee order attaches – balances available at the time of serving the order to

bank63. Consideration for a contract of guarantee shall be Consideration received by the

debtor64. A company has been sanctioned overdraft limit of Rs. 150000.00 against pledge of shares

and in this case, registration of charge is not necessary65. Simple mortgage is one which undertakes a personal obligation to pay the mortgage debt

and passing the right of sale of the said property through court66. In an ongoing situation, the right of set-off can be exercised by a banker – by serving a

reasonable notice on the customer67. Ombudsman scheme is framed under Section 35 A of banking regulation act68. In case a borrower signs the documents with the left hand – a separate note stating that

the documents signed with left hand is kept with the documents69. Joint and several demand promissory note should not be obtained in the case of

advance to – a limited company70. In the case of bank documents the following category of stamps are affixed – non judicial71. An export bill for US $ 10000 drawn under letter of credit is negotiated by your bank and is

submitted to the LC issuing bank for reimbursement and you are informed that the documents negotiated by your branch are forged. Negotiating bank is not liable as the bank is not liable for genuineness of the documents

72. Original demand draft is reported lost by the payee and in the meanwhile the draft is presented in the clearing – draft will be returned with the reason ‘Reported lost by payee and drawer’s instructions awaited”

73. Official Language (OL) rules 1976 is not applicable to the state of Tamilnadu74. If a person dies intestate, the court will issue the following documents – letter of

administration75. Import licenses are issued for CIF value76. Documents requiring stamping in terms of Indian Stamp act should be stamped before

execution or at the time of execution77. Kisan Credit card system has been introduced with effect from August 19, 1999 to take care

of credit needs of the agriculture on the recommendations of R V Gupta Committee78. The domestic inquiry relating to misconduct of an employee is governed by Industrial

Disputes Act79. Meaning of term – liquid surplus – in relation to the interpretation of the balance sheet – it

represents excess of current assets over current liability80. For disposing of the balances of the deceased customer dying without will or nomination

- letter of administration is required

81. Guarantees, confirmation of letter of credits issued by foreign banks, performance bonds, bid bonds, warranties are non fund exposures

82. Clean bill of lading - which bears no super imposed clause or notation which expressly declares the defective condition of the goods and or packaging

83. Free carrier allowance means – seller fulfils his obligation to deliver the goods when he has handed over the goods meant for export into the charge of the carrier named by the buyer

84. Foreign Currency, which has a tendency of quick migration is called as– hot currency85. Current Ratio – denotes the liquidity of the firm86. RBI has allowed authorized dealer the authority of opening of temporary foreign currency

accounts for organizers of international seminars, conferences, conventions etc, who have already obtained the prior approval of the concerned administrative machinery of the government

87. The exchange rate to be applied for effecting remittance of an import bill is – bill selling rate or forward sale contract if already booked

88. The negotiating bank has negotiated the documents under letter of credit and made payment to the beneficiary. The issuing bank refuses reimbursement to the negotiating bank saying that the documents are forged – in this case negotiating bank is not liable, since the bank has acted in good faith and the documents are apparently in order

89. In India, trade Control comes under the direct control of Ministry of Commerce90. In INCOTERMS, the term FAS represents – Free alongside the ship91. UCDPC is prescribed by ICC, Paris92. The first committee on mechanization and computerization in banking was headed by Dr. C.

Rengarajan93. “The committee on Institutional Credit to SSI Sector and related aspects” (Annual Projected

Turnover Method) was headed by – P R Nayak94. The bill is drawn in Mumbai and is acceptable/payable in New York and the drawee is at

New York and the bill is inland bill95. In Camels rating – “C” stands for Credit worthiness96. Asset Reconstruction Company has been set up by the Government to recover the non

performing assets – NPAs of weak banks97. Under “Narrow Banking” concept, the financial institutions invest only in

Government securities and not undertake loans and advances98. Margin of safety means – excess of total sales over break-even point in terms of

sales99. Advance for pisciculture is granted under “agriculture” segment.100. Noting and protesting is not applicable to foreign bill – noting and protesting is

applicable to promissory notes, bills of exchanges and cheques

Who is responsible for compliance of Official Language Policy of Government of India?

BANK EXAMINATIONS – GENERAL ASPECTS - PART:: 02

01. The administrative heads of the departments are responsible for compliance of Official Language Policy of Government of India

02. MS word is an application software

03. The locker holder is sick and as such he gives an authority in favor of the minor son to operate the locker and in this case, the bank can allow the minor to operate the locker

04. A is a minor and he endorses a cheque in favour of B. In the case of dishonour, A - cannot be held liable as when a minor endorses a cheque all parties are liable except the minor

05. You come across a cheque on which neither the words “bearer” nor “order” are written. You will make the payment of this cheque by treating it as an order cheque

06. Debt Service Coverage Ratio denotes solvency position of the firm07. Shroff committee had recommended that companies entering into merger and acquisition

transactions, making preferential allotment of shares to related parties and proposing buyback of shares must appoint registered valuer for independent valuation of shares and assets

08. Debt equity ratio denotes the solvency position of the firm09. The accountholder is the drawer of the cheque and in the case of draft, the issuing

branch is the drawer10. Not negotiable crossing means that the holder in due course will not get the better

title11. Account opening form is a very important document because it forms the basis of contract

between the bank and the customer and it contains the offer of the customer to enter into a contract with the bank

12. The following are not abound on a negotiable instrument as drawer, acceptor or endorser –a lunatic, an alien enemy and an insolvent

13. An order cheque is transferable only by endorsement and delivery14. The term – “allonge” refers to a plain sheet appended to a negotiable instrument for the

purpose of making endorsement thereon15. The following endorsements are invalid – endorsement after maturity of the

instrument, partial endorsement, endorsement on a discharged instrument and endorsement in the case of negotiation

16. “Account Payee” crossing is not mentioned in the Negotiable Instruments Act – 188117. The “protest” is the formal notarial certificate attesting the dishonour of the bill and based

upon the noting.18. Service Area Approach is a result of recommendation of committees headed by P D Ojha19. A person who owns unirrigated land of 3 acres will be classified as a marginal

farmer20. A foreign traveller encashes travelers’ cheques for $1000 at Rs. 47.25. It is a purchase

transaction21. A restricted letter of credit is one in which the negotiation is restricted to a specific

bank22. Red Clause letter of credit is one which authorizes release of preshipment finance to

the beneficiary23. Limited company means – limited liability clause in memorandum of association.24. Garnishee Order is issued under Rule 46 of Order XXI of the schedule to the code of

Civil Procedure - 190825. A contract of guarantee is defined as – a contract to perform or discharge the liability

of the principal debtor in the case of his default26. To be a valid acceptance, the drawee shall affix his signature with or without the

words – ‘Accepted”27. A Government Company means 51% of the paid up share capital is held by State

Government and/or Central Government28. If the registrar of DRT refuses to file the suit due to discrepancies in copybook, the bank

can file the appeal before presiding officer of DRT within 15 days29. Lok adalats are constituted under Legal Services Authorities act30. Stamp duty earned by the government on demand promissory note goes to the state

government

31. When the bill becomes due for payment – it is the starting point of limitation on a bill of exchange payable at a fixed time after date

32. Cash Reserve Ratio is maintained by the banks by keeping cash balance with Reserve Bank of India

33. Nomination facility can be allowed in the following cases – deposit accounts of individuals, articles kept in safe custody and safe deposit lockers

34. A certificate of deposit is an usance promissory note35. Subordinated debt is an element of tier II capital36. Accumulated loss will be deducted from tier I capital37. Vaghul Committee had recommended the introduction of Certificate of Deposits38. The basic nature of a commercial Paper is – it is usance promissory note39. “A pass through certificate” called as PTC can be of the following nature in

securitization transactions – with recourse and without recourse40. Global depository receipt is listed on Stock Exchange outside USA41. Current Ratio denotes liquidity42. Simultaneous sale and purchase of a share to take advantage of the variation in prices in

two different markets is called as– Arbitrage43. Current Ratio denotes – liquidity44. Debt Recovery Tribunals have been created by the Government as a result of the

recommendations of Narasimhan Committee45. When a bill matures on a public holiday, the maturity date of the bill falls on the next

preceding business day46. A negotiable instrument can always be negotiated until it has been paid up or

satisfied47. In the case of dishonour of a foreign bill, the protest is compulsory when it is required

by the law of the place where it is drawn48. An engineer is financed for the purchase of a car and the same can be classified as Non

priority sector49. Under drip irrigation system water is used very economically and supplied drop by drop

to the roof zone of crop50. “Yellow Revolution” is in connection with growing of fruits especially banana51. The economic life of a tractor is - 10 years52. The natural guardian of a married minor girl is her husband53. The minimum number of share holders in a Private Limited Company – two members54. To open an “Administrator account” the bank requires letter of administration55. Karta has the absolute authority to appoint any person as an agent and the agent need

not to be a family member56. Garnishee Order is the court order obtained by the judgment creditor attaching funds

with Bank of judgment debtor57. Indemnity means to make good the loss to the promise/indemnity holder58. A bearer who takes a bearer cheque bonafide and for value will be a holder in due

course59. Mortgage is defined in – Section 58 of transfer of property act – 188260. A banker can exercise the right of set-off only in respect of debts due and determined61. Banks are restricted to advance against its own shares – as per Banking Regulation Act

194962. The recovery of dues after issuance of recovery certificate by Presiding Officer of DRT can

be made through – Recovery Officer of DRT63. The roles of Lok Adalat – to arrive at compromise or settlement; issue final judgment

and to give the consented decree64. The remedy under Section 138 of Negotiable Instruments Act is available – when the

cheque is presented to paying banker within a period of three months or within the period of its validity whichever is earlier

65. In case a document travels from higher stamp area to lower stamp area, additional stamps are not required to be affixed

66. The purpose of maintaining a “documents execution register” is that it is a prima facie evidence of execution of documents

67. One rupee note bears the signature of the Secretary, Ministry of Finance68. Nomination facility is not allowed in the case of joint safe custody accounts69. Free capital is a part of tier I capital70. Kumar Mangalam Birla is the architect of SEBI’s Corporate Governance Code71. Malhotra Committee had suggested to establish an “Insurance Regulatory Authority”72. The minimum denomination for a Commercial Paper is Rs.5.00 lakhs73. The maximum period for which a certificate of deposit can be issued – not more than 12

months74. Capitalisation of reserves leads to issue of bonus shares75. 1,2,3,4,5,6,7,8,9 – numerals are called as - International form of Indian numerical76. Key-board is an input device77. MS - DOS is a system software78. Dear money policy is meant to control inflation79. An illiterate borrower cannot sign acknowledgment of debt but affixes his thumb impression

on it. The limitation period will be extended by this action80. Section 45 Z of Banking Regulation Act 1949 relates to handing over of original paid

cheques to the corporate customer81. As per the Prompt Corrective Action scheme, RBI can initiate certain structured actions in

respect of the banks which have hit the trigger points in terms of CRAR, Non performing advances and Return on advances

82. Under Know Your Customer guidelines, the identification and reporting of suspicious transactions are to be done on quarterly basis to Audit Committee of the board of directors

83. To prevent slippage of accounts to NPA category, RBI has designed broad framework detailing preventive and corrective measures. One of the measures is the introduction of new asset category between “standard” and “sub standard”. This new category is called special mention accounts

84. While opening accounts of Executors and Trustees to the estate of a deceased person, bank should scrutinize the trust deed, order of charity commissioner and probate

85. Stamp duty on which of the following documents does not vary from state to state – mortgage agreements, hypothecation agreements, guarantee agreements and bills of exchange.

86. If no time for payment is specified in a promissory note or bill of exchange, such an instrument is considered as – instrument payable on demand

87. Acceptance is not required in the case of promissory note and demand bill of exchange

88. To open an executor account the bank should insist on probate89. The following do not fall within the implied powers of a partner under section 19(2) of the

Partnership act, 1932 – opening a banking account on behalf of the firm in his own name, compromising or relinquishing any claim or portion of a claim by the firm and withdrawing suit or proceedings filed on behalf of the firm

90. In a balance sheet, profit is shown under liabilities side91. The term – preshipment advances is used to describe advances granted to exporters

for the purpose of manufacturing, processing, packaging etc. or simply procuring goods meant for export

92. In an account of a minor operated by the guardian, after the death of the guardian, the balance cannot be paid to the minor even though he has completed the age of 10 years

93. On the death of a partner, the firm having credit balance stands dissolved and to wind up the affairs of the firm the surviving partners are allowed to jointly operate the account and if it decides to continue after registering the Municipal Death certificate recording fresh mandate for operation, the existing account can be continued and operation allowed

94. Opening a banking account on behalf of the firm in his own name, compromising or relinquishing any claim or portion of the claim by the firm, withdrawing suit or processing filed on behalf of the firm do not fall within the implied powers of a partner under Section 19(2) of the Partnership act – 1932.

95. Garnishee order attaches debts due or accruing due. This means deposits payable on demand and payable at a future date

96. Parties to a guarantee are principal debtor, surety and creditor97. A cheque may be crossed by drawer or holder98. The purpose of mortgage is to possess the ownership of other’s property99. A banker can set-off the amount held in the time deposit account of a customer against the

debit balance of the same customer in overdraft account only after maturity of the fixed deposit

100. Civil Procedure code provides the provision exemption for arrest in execution of a decree for money under Section 56

Whether identity is necessary in the case of a bearer cheque?


01. In the case of a bearer cheque, the identity is not necessary02. When an order cheque is endorsed in blank, it becomes payable to bearer and

transferable by mere delivery03. A cheque crossed “Not Negotiable”, is still transferable04. As per section 138 of Negotiable Instruments Act, there is a provision of penalty when the

cheque issued in discharge of a liability is dishonoured due to insufficient funds in the account and if the cheque has been presented to the bank within a period of three months and is not honoured due to insufficient funds

05. A fixed deposit receipt cannot be endorsed06. A cheque is presented in an account but there is no sufficient balance to meet the

same. The cheque will be returned with the remarks – insufficient funds07. The cheque on behalf of a partnership firm can be stopped for payment by any

partner whether authorized to operate the account or not08. The marginal farmer is one who possesses agriculture land upto 1.25 acres of

irrigated land or 2.5 acres of non-irrigated land09. Registration of charge is not required in the case of pledge, lien, set-ff and

appropriation10. Loans for construction of godown for own use of farmers is not part of indirect finance

to agriculture11. Olericulture is cultivation of vegetables12. Agriculture labourer is a labourer whose income from agriculture is more than 50%13. Nostro account is an account of a bank established in India with a Foreign Bank in

another country and the account is maintained in foreign currency14. Resident Foreign Currency (RFC) account scheme is available for home returned Non

resident Indians15. Under packing credit limit, the extent of finance is computed on the basis of Freight

on Board basis16. Forfaiting refers to discounting of export bill without recourse to the seller17. In an overdraft account, when the death notice of partner is received the bank should

stop the operations to avoid application of Clayton’s case

18. A company is not dissolved by lunacy of a director or bankruptcy of a director or death of a director

19. In the case of insolvency, the banker’s obligation to honour customer cheques comes to an end when the customer is adjudged insolvent

20. A lien is the right to retain goods or securities belonging to a debtor until he has discharged a debt due to the retainer thereof

21. The shareholders of a Private Limited Co cannot transfer the shares to any other individual other than the shareholders of the company

22. The rule in Clayton’s case applies in the case of running accounts having debit balances in respect of partnership accounts

23. The term banking has been defined by Banking Regulation act – 194924. Bills drawn in respect of goods delivered by parties to various Government/Semi

Government departments are known as supply bills25. Goiporia committee has made the recommendations – Commencement of employee

working hours should be 15 minutes before commencement of business hours26. Banking companies are registered under – Banking Regulation act - 194927. Bipartite settlements are registered under Industrial Disputes Act28. Financial products, whose prices are derived from the price of the underlying currency,

interest rate, stocks etc are called as– securitization29. Revaluation reserves is a part of subsidiary capital/tier II capital30. The committee headed by Y V Reddy –revised the concept of liquidity and monetary

aggregates31. Verma Committee was appointed to examine the restructuring of weak banks32. The process through which any member-owned organization becomes a shareholder-owned

company is called demutualization33. Official Language deals with the following articles of constitution – 343 to 35134. Hindi was declared as the official language of the union on 14-09-194935. The system of electronic funds transfer was suggested by the committee headed by – B D

Shah36. INFINET is – RBI’s VSAT based communication system37. The negotiable instruments act is applicable in the entire part of the country38. If the cheque is drawn in favour of “Mother God” or order, the cheque is to be returned

with the reasons – “since drawn on fictitious name”39. A cheque payable to Rohit is endorsed as follows – Pay to “Kabil on his marriage”. This

endorsement is conditional endorsement40. The cheque crossed – “account payee” drawn in favour of Mr Brij Nand is presented by

Raman in his account and in this case the bank should not make the payment41. The following are not negotiable instruments – airway bill, a currency note, a letter of

credit and lorry receipt42. Under section 25 of Negotiable Instruments Act, public holidays are declared by – the

respective state governments by notifications in the official gazettes43. Conversion means – not crediting the amount in the account of true owner44. By “General Crossing”, we mean two transverse parallel lines on top left hand

corner of a cheque45. Forward exchange contract is an agreement where the foreign exchange is delivered

at predetermined future date at a contracted date46. Unless otherwise specified in the letter of credit, the insurance amount should be

expressed in the currency of the letter of credit47. On the death of the partner, bank opens a new account to rule-of the existing

account to avoid application of Clayton’s case48. Executor in banking means a person named by the deceased in his will and for

which probate is obtained49. The partnership firm doing the banking business cannot have more than 10 partners and

for other business not more than 20 partners; otherwise it will become illegal association. It is provided in Companies act

50. Prospectus is an invitation to the public to subscribe shares or debentures or deposits51. According to the rule in Clayton’s case, the money paid in by a customer are to be applied

towards adjustment in overdraft account in order of time in which the debits were incurred

52. Banking company is prohibited for undertaking business like trading of goods etc under – Banking Regulation act 1949

53. For availing remedy under section 138 of Negotiable Instruments act, the holder will have to give notice to the drawer within 30 days of return of the cheque

54. When a firm has branches at different places and wishes to avail the loan at all stations, the documents will be executed at its Head Office and sub limits will be allocated to branches at different places

55. In the case of any doubt about stamp duty, clarification can be sought from State Stamp Authority and Controller of stamp duty

56. Banks were nationalized under – Banking Companies (Acquisition and transfer of undertaking) act-1970

57. When an account shows debit balance, the banker is a creditor and when the account shows credit balance, the banker is the debtor

58. Partnership firms cannot do the business of banking and it is provided under the banking regulation act 1949

59. The concept of authorized deduction and illegal deduction is mentioned in the act – Payment of wages act

60. The process of replacing paper securities into electronic holding of shares is known as –dematerialization

61. Official Language policy came into force from 16.01.195062. The Central Processing Unit – CPU- consists of control unit and arithmetic logic unit63. When the price of dollar is raised from Rs. 48 to Rs. 55 the exporter will be benefited

in terms of rupee64. A cheque is the mandate of the accountholder65. When a cheque without a date is presented for payment, the banker should return the

cheque66. In a cheque the name of the banker had been written with or without the words – “Not

negotiable” – In this case, it is called as a special crossing67. For negotiating a negotiable instrument there are no limits68. A bearer cheque is transferable only by delivery69. A bill drawn in Paris and drawn in favour of a trader in Mumbai and payable in Chennai is

called a foreign bill70. The Negotiable Instruments Act provides protection to the collecting banker in respect

of Conversion71. Crossing of a cheque denotes that it should be paid to a banker only72. By noting, it is meant that the fact of dishonour has been recorded by the notary

public on a dishonoured bill or/and on a plain paper attached to the bill73. Sericulture is classified under – direct agriculture advance74. Mahima relates to refinance by NABARD to banks for onlending to agencies for

marketing of non farm products of rural women75. Foreign exchange transactions are viewed always from the angle of the bank76. The responsibility of managing the foreign exchange resources lies with – Reserve Bank

of India77. Exim policy is announced by the Ministry of Commerce78. In a Free on Board contract, freight and insurance will be borne by the importer79. If a letter of credit is slient about the revocability, then the letter of credit is irrevocable80. Crystalisation of sight export bills purchased/negotiated will be done on the expiry of

transit period plus 30 days81. A transferable letter of credit can be transferred only once82. Natural guardian under Hindu Minority and guardianship act, 1956 will be – his father and

after him the mother

83. For banking transactions, an administrator is one who is appointed by the court if the deceased has died intestate

84. Banker’s lien is an implied pledge85. A contract of insurance is a contract of indemnity86. Acceptance of a usance bill will be made on the face of the bill87. The right of set-off can be exercised by the banker only when the relationship between

the customer and the banker is that of debtor and creditor88. Bank must create reserve fund and 25% of the profits should be transferred to this fund

before any dividend is declared and this is as per Banking Regulation act 194989. Limitation period for availing the remedy under Section 138 of Negotiable Instruments Act

is one month from the date of cause of action90. In case the amount of loan to a company is decreased or increased, the memorandum of

modification or charge should be submitted to the Registrar of companies91. The rate of revenue stamp is the same throughout India except in Jammu and

Kashmir92. When articles are kept in safe custody, the relationship between banker and customer is

that of bailee and bailor93. In the case of minor’s joint account with the guardian and when the minor attains

majority, the guardian should not be allowed to operate the account94. Wages of employees are settled under Minimum wages act95. CB Bhave committee has looked into ways to reduce cost of demat operations and the

said companies should bear a substantial part of dematerialization costs96. Basle committee relates to Capital Adequacy97. In Camel’s rating – E stands for earnings98. The revised definition of a sick SSI unit has been given by Kohli committee99. Greenshoe option is retaining the full/part of equity subscribed by investing public

over and above that issued

100.Hindi is accepted as an official language of the union under Devanagiri script

Date post:	10-Jul-2016
Category:	Documents
Upload:	ambujchinu
View:	169 times
Download:	2 times