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INDIAN INSTITUTE OF BANKING & FINANCE JAIIB MODULE (A & B) LEGAL ASPECTS OF BANKING OPERATIONS Thursday 17 APRIL 08 T M C VASUDEVAN 01..Identify which one is treated ... – PowerPoint PPT presentation

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  • 01..Identify which one is treated as the
    secondary business of a bank a.. Accepting
    Deposit b.. Lending Money c.. Issuing Demand
    Draft d.. Making Investments

  • 02..Banking is defined in the Banking Regulation
  • Primary function to accept deposit, lend and
  • Secondary functions include opening of Letters of
    credit , Issuing Bank guarantees, Demand Drafts
  • Mail Transfers, Telegraphic Transfers,
    Collection of instruments
  • Executor Trustee services, Dealing in Forex
    related transactions

03..G has approached the drawee bank to handover
the original cheque issued by him and since paid
to the debit of his account.
  • A.. Bank to take permission of the Head Office
  • B.. Bank to refuse
  • C.. At the most they can provide a Xerox Copy
  • D.. Bank to comply with the request.

  • 04..Safe Deposit Locker facilities, accepting
    Safe custody articles and so on
  • Now bankers offer other services like
  • ATM, Debit, Credit and other plastic cards
  • Accepting Electricity, Telephone bills , and
    extending services on behalf of the Service

05.. As per the provisions of the Banking
Regulation Act, a banking company to file within
30days of the close of each financial year a
return of unclaimed deposits.
  • A.. The above statement is not incorrect
  • B.. The above statement is incorrect.
  • C.. It is Reserve Bank of India Act
  • D.. Even the answer C is only partially correct

  • 06..Latest provisions of KYC and other procedures
    to be adopted while making a person as their
    customer, the banker has to take due care .
  • Any lapse on the part of the bank may cause the
    bank at a later stage.
  • A banker should be able to justify beyond doubt
    that his customer has become his customer after
    following all the procedures, norms and he has
    acted as a prudent banker.

  • 07..Reserve Bank of India Act,1934 was enacted to
    constitute the Reserve Bank of India
  • a.. To regularize the issue of Bank notes
  • b.. To Regulate the issue of Bank notes
  • c.. For directing the banks when they err
  • d.. To Act as the banker of the Central

  • 08 ..Reserve Bank of India act was introduced in
    1934 and since then amended from time to time to
    include the latest requirements.
  • A provision was inserted by the Information
    Technology Act,2000 to enable RBI to make
    regulations for regulating payment systems of
    banks and financial institutions

  • 09.. RBIs whole capital is held by the Central
  • .. The board has one Governor and not more than
    4 Deputy Governors appointed by the Central Govt
  • .. RBI alone can issue and mange currency in
    India as per the provisions of RBI act.

  • 10.. RBI as regulator of banking sector is mainly
    by virtue of the provisions of the Banking
    Regulation Act
  • RBI inspects banks and exercise supervisory
    powers and may issue directions in public
  • RBI also collects credit information and make
    available the same
  • RBI also imposes penalties wherever applicable

  • 11.. Reserve Bank of India has so far not issued
    currency notes of the denomination of
  • a.. Rs.2/-
  • b.. Rs.200/-
  • c.. Rs.5000/-
  • d.. Rs.10000/-

12..In case of winding up of the banking company,
each depositor will have to make the claim within
20 days of the winding up order.
  • A.. True
  • B.. False
  • C.. The claims of every depositor deemed to have
    been filed for the amount as shown in the books
    of the banking company standing to his credit..
  • D.. It is not within 20 days but within a period
    of 15 days.

  • 13.. Other than the Governor, Deputy Governors
    of RBI, the other directors are
  • a.. Appointed
  • b.. Nominated
  • c.. Selected
  • d.. Elected

  • 14..C has appointed M has the nominee for his
    safe deposit locker and for savings bank P. Both
    nominations got registered with the bank.
    Nomination form for locker not signed by C. Both
    facilities are joint and operation several.
  • a.. Operations in the locker will be affected
  • b.. Operations in the locker will not be affected
  • c.. On the death of C, P will be entitled to
    operate the locker
  • d.. The question of P does arise as he is part
    of the contract

15.. Making any false statement in any return,
balance sheet or other documents or information
given under the BR act (sec46) punishable.
  • A.. The above is incorrect
  • B.. The above is not incorrect.
  • C.. Punishment is not for any as stated above.
  • D.. Punishment is applicable only when there is
    willfully any false statement and so on.

  • 16.. A is the nominee of the Safe deposit
    articles, deposited by R with bank L. In the
    event of death of R
  • a.. The legal heirs of A will receive the safe
    deposit articles
  • b.. A will not be entitled to receive the same
  • c.. According to the Will the same will be given
    to the person mentioned therein otherwise to
    legal heirs of R.
  • d.. L will have to hand over to A after
    completing the related formalities.

  • 17.. A B has kept a joint Reinvestment plan
    deposit with bank J. U was nominated. Both the
    depositors unfortunately died along with U
    nominee while traveling in a car due to accident.
  • a.. Money will be retained by the bank.
  • b.. Legal heirs of A, B C would get.
  • c.. Legal heirs of C alone would get
  • d.. All the above are wrong.

  • 18.. The co-operative banks are under the
    regulatory purview of the Reserve Bank of India.
    This is due to the amendment to
  • a . Reserve Bank of India Act
  • b . Cooperative Act
  • C . Banking Regulation Act
  • d . Both a b

19..The State Bank of Hyderabad has been
established as per the provisions of
  • A.. Hyderabad State Bank Act
  • B.. State Bank of Hyderabad Act
  • C.. State Bank Of India Act
  • D.. Reserve Bank of India Act

  • 20..The State Bank of Saurashtra was constituted
    under the
  • a.. State Bank of India (Amalgamation)
  • Ordinance,1955
  • b.. State Bank of Saurashtra Act,1955
  • c.. Saurashtra State Bank Act,1950
  • d.. Saurashtra State Banks(Amalgamation)
    Ordinance, 1950

21.. For State Bank Of India Audit who can be
eligible to conduct Audit.
  • A.. Director of the Bank
  • B.. Not a member of Local Board
  • C.. Member of a Local Committee
  • D.. An Office of the State Bank of India

  • 22..For conducting audit of the State Bank of
    India, the appointment of auditors done
  • A.. By Reserve Bank of India independently
  • b.. By RBI after taking into confidence SBI
  • c.. By Central Government
  • d.. By RBI in consultation with Central

23..State Bank of Mysore was established as per
the provisions of
  • A.. State Bank of Mysore Act
  • B.. State Bank of India Act
  • C.. Reserve Bank of India Act
  • D.. State Bank of India (Subsidiary Banks) Act

  • 24.. RBIs refusal of licence will make the
    company ineligible to undertake banking
    business, but still the company can carry on
    other business like money lending
  • . . RBI can stipulate a higher requirements of
    capital for the purpose of licensing a banking
    company, the RBI has to be satisfied that the
    company has adequate capital structure and
    earning prospects

25..The Commercial Banks were Nationalised as
  • ..The Bank Nationalistion Act (Banking Companies
    (Acquisition and Transfer of Undertakings)Act,1970
  • .. The Banking Companies (Acquisition and
    Transfer of Undertakings) Act,1980.
  • .. The First nationalisation took place in 1969
    and the Second in 1980.
  • .. In the first nationalisation 14 Scheduled
    commercial banks were nationalised followed by 6
    in the next stage.

  • 26.. Presently the number of Nationalised banks
  • a.. 14
  • b.. 06
  • c.. 19
  • d.. 20

  • 27.. In addition to the conditions applicable to
    domestic banks, for foreign banks RBI will look
  • a. Whether the carrying on of banking business by
    the company in India will be in public interest.
  • b. Whether the government of the law of the
    country in which the company is incorporated
    discriminates in any way against banking
  • C.. Whether the company complies with the
    provisions of the BR Act as applicable to foreign

  • 28.. As per the BR act, a foreign bank (banking
    company incorporated outside India) operating in
    India has to deposit and keep deposited with RBI
    an amount of Rs.15 lacs (for such banks having
    places of business in Mumbai or Kolkata or both
    Rs.20 lacs)
  • .. In addition to above, 20 of profit to be
    remitted with RBI

  • 29..The amount of deposit with RBI by foreign
    banks to be kept in
  • a.. Cash
  • b.. Unencumbered approved securities
  • c.. Partly in both
  • d.. Only in encumbered approved securities

30.... The State Bank of India is empowered
under Section 47 to inspect the subsidiary banks.
  • A.. The above statement is not false.
  • B.. The above statement is incorrect
  • C.. Only RBI can inspect and not State Bank
  • D.. One subsidiary bank to inspect another and so

  • 31..At least 51 of the total number of directors
    shall be persons who have special knowledge or
    practical experience in respect of accountancy,
    agriculture and rural economy, banking,
    co-operation and so on
  • ..The directors of a banking company not to hold
    office for more than 8 years continuously
  • ..The whole time Chairman and a Managing
    Director shall hold office for a period not
    exceeding 5 years

  • 32.. The Whole-time Chairman or the Managing
    Director of a banking company should have special
    knowledge or practical experience of the working
    of a banking company or State Bank of India or a
    subsidiary bank or a financial institution or
    financial, economical or business administration.

  • 33.. As per the provisions of the Reserve Bank of
    India Act, the Whole time Chairman or the
    Managing Director of a banking company to hold
    qualification shares of minimum 50.
  • It is not 50 but 200
  • They need not hold any qualification shares
  • They need to have minimum qualification shares
    of 10 as per the provisions of Banking Regulation
    act and not RBI act
  • They need to hold qualification shares but no
    restriction with regard to the numbers.

  • 34.. Banks have to file a return on their
    unclaimed deposit within 30 days of the end of
    each calendar year.
  • .. All deposits not operated in 10 years
  • .. For term deposits, the period of 10 years
    starts from the expiry of the period of the

  • 35.. RBI issues directions from time to time
    regulating the lending operations of banking
  • ..The tools employed for exercising
    Selective Credit Control are
  • ..Minimum margins for lending against
    selected commodities
  • .. ceilings on the levels of credit and
  • .. charging of minimum rate of interest on
    advances against specified commodities

  • 36.. RBI is authorized to regulate interest rates
    on loans and advances as well as deposits.
  • The Usurious Loans Act. 1918 prohibits lending at
    exorbitant rates. The law has been made to
    protect the weaker borrowers from the powerful
  • ..RBI has issued guidelines in respect of
    internet banking. These cover a.. Technology
    and Security issues b.. Legal issue and c .
    Regulatory and supervisory issues

  • 37..Banking Ombudsman is an authority established
    under the Banking Ombudsman Scheme, 1995 by the
    RBI. The purpose is to resolve and settle the
    complaints of banking public against the
    commercial banks and the scheduled primary
    cooperative banks without resorting to courts.

  • 38.. Banking Ombudsman scheme applicable to
    all commercial banks, RRBs and schedules primary
    co-operative banks.
  • .. Disputes between two banks can also be taken
    up with the Banking Ombudsman
  • .. Even the Credit card related issues can be
    taken up with the Banking Ombudsman
  • ..A banking ombudsman may act as an arbitrator

  • 39.. identify the odd one (Banking ombudsman)
  • a.. Observance of Reserve Bank directives on
    interest rates
  • Non-acceptance of application for loans without
    assigning valid reasons to the applicant
  • Non-issuance of Demand Drafts to non-customers
  • Non-adherence to prescribed working hours by

  • 40.. Appropriation of any amount from the reserve
    fund or the share premium account has to be
    reported to RBI within 21 days of such
  • .. Every scheduled bank has to submit a return to
    RBI showing the demand and time liabilities and
    borrowings from banks in India

  • 41..A bank has to submit a Friday statement to
    RBI . The said Friday(15th of a particular month)
    has not been declared as holiday under the
    Negotiable Instruments Act, but the previous and
    subsequent working days were declared . Then the
    statement to be prepared as on
  • a.. 16th of that month b.. 14th of that month
  • c.. 15th of that month d.. 17th of that month

  • 42.. Every banking company has to maintain in
    India certain amount of assets as per the
    provisions of BR act.
  • .. At the close of business on the last Friday of
    every quarter, such assets shall not be less than
    75 of the demand and time liabilities of the
    banking company in India.

  • 43..As per the provisions of the BR Act, a return
    regarding the liquid assets maintained in India
    to be submitted to RBI, within 14 days from the
    end of every quarter.
  • a.. Not 14 days b.. It is 20 days
  • c.. It is 15 days not 20 days
  • d.. Three months

  • 44...A banking company need not submit copies of
    balance sheet and auditors report to the
    Registrar of Companies.
  • a. True b.. Incorrect
  • C. The banking company has to submit to Registrar
    of Companies as well.
  • D.. Since they are submitting to RBI there is no
    need to submit to Registrar Companies separately

  • 45.. Foreign banks (banking companies
    incorporated outside India) operating in India
    have to display in a conspicuous place in their
    principal office a copy of the last audited
    balance sheet and profit and loss account. This
    has to be done not later than
  • a.. The First of July of the year in which it
    carries on business
  • b.. The First Monday in August
  • c.. The First Friday in September
  • d.. The Last Friday in November

  • 46..It is not mandatory to give a copy of the
    report to the banking company.
  • a.. Inspection report b.. Scrutiny report
  • c.. Search report d.. All these

  • 47.. To order amalgamation of two banking
    companies under the provisions of Companies Act
    rests with
  • a.. Reserve Bank of India
  • b.. Reserve Bank of India Company Law Board
  • c.. Central Government with the consultation
  • of Reserve Bank of India
  • d.. Company Law Board

  • 48.. State Bank of India was established under
    sec 3 of the State Bank of India Act,1955 to take
    over the undertaking of the then Imperial Bank
    and to carry on the business of banking and other
    business in accordance with that act.
  • .. The Central Government can give directions to
    SBI on matters of policy involving public
    interest in consultation with the Governor of RBI
    and the Chairman of the State Bank.

  • 49..State Bank of India Chairman and Managing
    Director are appointed for a period of 7 years.
  • A.. For Chairman it is 7 years, but for MD it is
    5 years
  • B.. For both it is not to exceed 5 years
  • C. For both it is not to exceed 6 years
  • D.. For Managing Director it is 7 years but for
    Chairman it is only 5 years

  • 50..The State Bank will act as an agent of RBI at
    the places where it has a branch and where RBI
    has no branch.
  • To handle government and other business as
    required by RBI.
  • .. The terms and conditions shall be as agreed
    between them.

  • 51.. Regional Rural Banks have the holding
    pattern such as Central Government 50 , Sponsor
    Bank 35 and State Government 15
  • Two or more RRBs may be amalgamated by the
    Central Government by notification in the
    Official Gazette.

52..The issued capital of the Regional Rural Bank
is held as 15 5035 by
  • A.. Regional Rural Bank State Government
    Sponsor Bank
  • B.. State Government Central Bank (RBI)
    Sponsor Bank
  • C.. State Government Reserve Bank of India
    State Bank of India
  • D.. None of these

  • 53.. Regional Rural Bank cannot
  • a.. Open deposit accounts
  • b.. Lend to Agriculturalists
  • c.. Extend Credit to small entrepreneurs
  • d.. None of the above

  • 54.. Management of the affairs of a RRB is vested
    with the
  • a.. Board of Directors
  • b.. Sponsor Bank
  • c.. Reserve Bank of India
  • d.. Rural Credit Department

  • 55..Which one is not appropriate (RRB)
  • a.. The auditors report and report on the
    working of
  • RRB has to be laid before the Parliament.
  • b.. RRBs were first set up in 1975 under the
  • Regional Rural Banks Ordinance,1975.
  • c.. Reserve Bank of India is empowered to give
  • directions to RRBs on matters of policy
  • public interest.
  • d.. The board consists of a Chairman appointed
    by the Sponsor Bank.

  • 56.. The directors of Nationalised banks are
    nominated by the Central Government or elected
    from shareholders.
  • .. Among others one Chartered Accountant with not
    less than 15 years of experience nominated in
    consultation with RBI.
  • .. Not more than 6 directors to be nominated by
    Central Government

  • 57.. In respect of Nationalised Banks, the shares
    other than those held by the Central Government
    are freely transferable. No shareholder other
    than the Central Government can exercise voting
    rights in excess of 1 of the total voting
    rights of all the shareholders.

58..Displaying of an audited balance sheet to be
done not later than the first Monday in November
of any where the banking business held.
  • A.. Applicable to all banks
  • B.. Only applicable to Foreign Banks
  • C.. Applicable to New Private Banks
  • D.. None of the above

59.. As per BR Act the return on Liquid Assets
to be filed within
  • A.. 7 days from the end of the month to which
    it relates.
  • B..15 days from the end of the month to which it
  • C.. 20 days from the end of the month to which it
  • D.. 30 days from the end of the month to which
    it relates

60.. Banking Ombudsman is
  • A.. Discontinued and a new company has been set
  • B.. Not applicable to delays in receipt of export
  • C.. Applicable to adherence to prescribed
    working hours by branches.
  • D.. All the above are not True.

  • 61.. State Bank of India act was amended to
    divide capital into shares of Rs.10 each instead
    of Rs.100/-
  • The Banking Companies (Acquisition and Transfer
    of Undertakings )Act amended to facilitate public
    holdings of shares.
  • Authorized capital could be up to Rs.1500/- crore
    divided into shares of Rs.10/-each and also to
    increase or reduce the authorized capital between
    Rs.1500 crore and Rs.3000 crore

  • 62..The minimum paid up capital and reserves to
    start banking business by a cooperative bank is
    not less than Rs.1.00 lac
  • .. A co-operative bank not to lend on its own
    shares/ unsecured loans or advances to its
    directors/ any company or associates wherein the
    director has interest

  • 63..Restrictions not applicable for unsecured
    loans/ advances made by a co-operative bank
    against bills for supplies or services made to
    government or bills of exchange arising out of
    bona fide, commercial or trade transactions.
  • .. A co-operative bank to get permission of RBI
    to open a branch in a new place.

  • 64..The process of merging one or more companies
    with another , or two or more existing companies
    merging into a new company.
  • A... Amalgamation
  • b.. Merger
  • c.. Take Over
  • d.. Consolidation

  • 65..If an act or omission on the part of an
    accused constituting an offence continues from
    day to day a fresh offence is committed on every
    day on which the act or omission continues.
  • a.. Continuing offence
  • b.. Continues offence
  • c.. Perpetual succession
  • d.. None of the above

  • 66..The primary objective of this is to finance
    its members and includes a co-operative land
    development bank.
  • a.. Co-operative Credit Society
  • b.. State Co-operative Bank
  • c.. Urban Co-operative Bank
  • d.. Co-operative Bank

  • 67..An officer appointed to conduct court
    proceedings for winding up of companies and
    includes Reserve Bank of India or other persons
    appointed to conduct winding up of banking
    companies under the appropriate provisions of the
    Banking Regulation Act.
  • a.. Inspector
  • b.. Notary Public
  • c.. Pleader
  • d.. None of these

  • 68..Corporate Governance is a dynamic concept
    involving promotion of corporate fairness,
    transparency and accountability in the interests
    of shareholders, employees, customers and other
    stake holders.
  • .. The concept has evolved since the first major
    study by Cadbury Committee in 1992.

  • 69..The Basel Committee on Banking Supervision
    has issued guidelines (February 2006) for
    promoting the adoption of sound principles of
    corporate governance by banking institutions
  • .. Reserve Bank of India initiated several
    measures to strengthen the corporate governance
    in the Indian banking sector.

  • 70..The concept of fit and proper criteria for
    directors of banks which included the process of
    collecting information, exercising due diligence
    and constitution of Nomination Committee of the
    board to scrutinise the declarations made by
    the bank directors.

  • 71..As per the recommendations of the Ganguly
    Committee on Corporate Governance, guidelines
    have been provided in respect of Fit and Proper
    criteria for directors of banks by RBI circular.
  • . For public sector banks, the principles of
    corporate governance have been statutorily
    recognised as per Banking Companies
    (Acquisition and Transfer of Undertakings)
    Financial Institutions Laws (Amendment) Act,2006.

  • 72..In any other company a director of a banking
    company not to have
  • a.. Any interest
  • b.. Beneficial interest
  • c.. Vested interest
  • d.. None of these

  • 73..When the customers signature on the cheque
    is forged there is no mandate to the bank to pay.
    As such a banker is not entitled to debit the
    customers account on such forged cheque.
  • .. The drawee of a cheque having sufficient funds
    of the drawer in his hands properly applicable to
    the payment of such cheque must pay the cheque
    when duly required to do so, and, in default of
    such payment, must compensate the drawer for any
    loss or damage caused by such default.

  • 74.. Payment in due course means payment in
    accordance with the apparent tenor of the
    instrument in good faith and without negligence
    to any person in possession thereof under
    circumstances which does not afford a reasonable
    ground for believing that he is not entitled to
    receive payment of the amount therein mentioned.

  • 75.. A cheque has been received by the drawee
    bank in local clearing. At that time the account
    has clear balance to meet the cheque amount.
    However, it has been noted that the Words and
    Figures differ. The cheque contained Rs Eleven
    thousand one hundred and eleven in words but in
    figures read as Rs.1111/- Bank has to
  • a. Make the payment
  • b. Dishonour the cheque
  • c.. Make payment for only Rs.11111/- as per
  • d.. Act as a prudent banker

  • 76..A cheque has been received in clearing on
    27th of this month bearing the date as 27th of
    three months ago. The cheque to be returned on
    the grounds
  • a. Stale Cheque
  • b.. Ante Dated Cheque
  • c.. Not to be returned
  • d.. Post Dated

  • 77..A cheque has been received for
    collection. The Collecting banker has given his
    necessary certificates on the reverse of the
    cheque, which had more than two endorsements.
  • a. It is the responsibility of the
    collecting banker to verify the regularity of
  • b. It is not the responsibility of the
    paying banker to verify the regularity of
  • c.. The Collecting bank as well as the
    paying bank are responsible to verify the
    regularity of endorsements
  • d.. It is the duty of paying banker to
    verify the same to ensure payment in due course

78.. M has issued a cheque favouring V for
Rs.6789/- The cheque has been otherwise in order
and the account has enough balance.
  • A.. The Collecting Bank will refuse payment
  • B.. The Collecting Bank will receive payment
  • C.. The Drawers Bank will not make the payment
  • D.. The Drawee Bank will not make the payment.

  • 79.. A cheque has been received by the drawers
    banker. On scrutiny it has been observed that the
    word bearer was altered into order by striking
    the bearer and writing over it as order. The
    drawer has signed only the cheque.
  • a.. The drawee bank need not make payment.
  • b.. The paying banker will be in order to
    return the same
  • with a reason Material alteration requires
  • authentication
  • c.. The above is not a material alteration.
  • d.. The responsibility lies with the collecting
    banker and not
  • the paying banker.

80.. After paying a cheque ,it has come to t he
notice of the bank that one of the endorsements
has been forged.
  • A.. The paying bank is protected
  • B.. It is a payment in due course
  • C.. If endorsements are regular he gets
  • D.. All of these

81..Which cannot be transferred by way of an
  • A.. The right on receivables
  • B.. The right over a Term deposit of the Bank
  • C.. The right over an Life Policy
  • D.. None

82.. A cheque has been paid bearing a visible
alteration on the payees name. The bank
  • A.. Will get protection under Sec10 of NI Act
  • B.. Will get protection under Sec89 of NI Act
  • C..Will get protection under both these sections
  • D..Will not get protection under both these

83..As per Section 89 of NI Act,1881 a bank
can seek protection only if there is a material
alteration in the cheque and does not appear to
have been altered.
  • A.. The above is correct
  • B.. The above is in correct
  • C.. The material alteration will not alter the
  • D.. The material alteration will to some extent
    alter the position.

84.. Bank W opened an account 18 months ago. The
bank had obtained the signature of an existing
account holder of another branch in the
application form. They opened the account based
on the same. When the banker collected a demand
draft on which the payment was released and also
parted the amount. After few days, the bank came
to know that the said demand draft was so
altered as to place of payment as well as amount.
  • A.. The Collecting bank will get protection.
  • B.. The Paying bank will get protection
  • C.. The Collecting bank will be held
  • D.. Both banks are responsible

  • 85..A Collecting banker should act in good faith.
  • He should collect cheques only for his
  • Cheques should have been crossed (Generally
    or specially)
  • Without negligence he should act.

  • 86.. A banker may have both the roles of
    Collecting as well as Paying banker.
  • A Collecting banker has to collect only for
    his Customer whereas the Paying banker to ensure
    that the payment is a payment in due course.
  • A Collecting banker to ensure that he
    collects such cheques which bear the Crossing
    whereas the paying banker is concerned about the
    regularity of endorsements.

  • 87.. For both Collecting banker as well as Paying
    banker will have to act in good faith and
    without negligence.
  • Collecting banker has to ensure that the
    payment is collected for the concerned customer.
    Whereas Paying banker to ensure that payment is
    not made to a wrong person.

  • 88.. The banker to understand his customer
    properly / adequately and the collecting banker
    should not act in a haste or in a casual manner.
  • The proper identification and opening of
    account with due care assumes lot of importance.
  • A collecting banker cannot avoid his
    responsibility, even at a later date, when it is
    proved that the account opened was not properly

  • 89.. There is no bar as such to collect a third
    party cheque. However, an account payee crossed
    cheque, the collecting banker not to collect for
    a third party.
  • He has to make necessary enquiries before any
    third party cheques are collected on behalf of
    its customer and ensure that his customer has the
    right to get such payment.

  • 90.. Bank E has collected an uncrossed cheque for
    his customer J. However, before collecting he
    has affixed his banks crossing seal (using the
    rubber stamp) .The banker
  • a.. Will get protection
  • b.. Will not get protection
  • c.. Will get protection, since the act allows a
    special crossing also
  • d.. Will not get protection, since the original
    cheque was uncrossed

  • 91..A collecting bank has collected a cheque, the
    crossing was in favor of another banker.
  • a.. The paying bank can make the payment since it
    has been collected by a bank.
  • b.. The drawee bank not to pay
  • c.. The Collecting bank is not in order in
    collecting such a crossed cheque
  • d.. Both b c

  • 92.. Customer W of a bank has lost the Fixed
    Deposit receipt. To obtain a duplicate deposit
    receipt among other things, W executed an
    indemnity. W is known as
  • a.. Surety b.. Guarantor
  • c.. Indemnifier d.. Indemnified

  • 93.. A contract of indemnity has two parties.
  • .. Indemnifier and indemnified
  • .. The indemnifier has to make good the loss as
    soon as it occurs.
  • .. There are only two parties to a contract of
    indemnity and hence only one contract.
  • .. An indemnity is for the reimbursement of loss

  • 94.. IN an indemnity the risk is contingent
    whereas in a guarantee the liability is
  • a.. The above is correct
  • b.. The above is incorrect
  • c.. For indemnity the risk is subsisting and for
  • guarantee the liability is contingent.
  • d.. For both risk contingent and liability

  • 95..The banker obtains indemnity to safeguard
    their interests . Indemnities obtained by them on
    account of
  • a.. Issue of duplicate demand draft
  • b.. Issue of duplicate Term deposit receipts
  • c.. While settling the death claims in which
    minors interest is involved
  • d.. In all the above cases

  • 96..The party who is entitled to be compensated
    by the indemnifier for any loss caused the
    indemnity holder due to any act on the part of
    the indemnifier or a third party, also called the
  • a.. Surety b.. Indemnity holder
  • c.. Guarantor d.. None of these

  • 97..Issuing of Bank guarantees is one of the
    functions of a banker.
  • It is a Non fund based credit extended by the
  • The bank to secure the bank guarantee, in
    addition to necessary securities, will have to
    obtain a Counter guarantee or Counter indemnity
    to safe guard their interest

  • 98..Bank guarantee is the commitment given by the
    issuing bank (Guarantor) to the beneficiary.
  • If the claim is made by the beneficiary within
    the guarantee period and as per the terms and
    conditions of the bank guarantee, then the bank
    should make the payment without fail and also
    without any delay.

  • 99.. Courts will not interfere in the functions
    of a banker with regard to bank guarantees issued
    by them.
  • The Courts will not prevent the bank from
    making the claim amount on the bank guarantee.
  • The Courts will interfere only when there is a
  • mala fide intention or fraud or forgery takes

  • 100.. A bank guarantee has been issued by Bank K
    on behalf of its customer L in favor of R. The
    guarantee amount being Rs.1.80 lacs. When the
    claim received by Bank K from R, the bank has a
    balance of Rs.3.22 lacs in the current account of
    L. Then the bank K
  • a.. Can debit Ls current account with the
    claim amount and make a demand draft in favour of
    R and send.
  • Before doing so Bank K to consult L and take his
  • Bank K to discuss with R
  • Can not debit the current account of L but
    extend an advance in favour of L and then make
    the payment

  • 101.. Bank has issued a performance guarantee to
    their client U. Since U did not perform, the
    beneficiary O invoked the guarantee. Bank has to
    make the payment. At that time, the current
    account had minimum balance. The guarantee claim
    Rs.4.00lacs. Margin Fixed deposit Rs.2.00 lacs.
  • a.. Bank has to refuse payment
  • b.. Bank to honor the guarantee commitment at any
  • c.. Bank to lend advance for Rs.2.00 lacs and
    close Fixed deposit and make payment to
    beneficiary by way of Demand draft or Bankers
  • d.. Ask the client U to remit Rs.2.00lacs and
    after receipt of the same they have to make
    payment to beneficiary. Accordingly O to be

102.. An arbitrator under Banking Ombudsman
  • a.. CMD of one of the Nationalised Banks
  • b.. One of the Deputy Governors of RBI
  • C.. Finance Ministry Representative
  • D.. Banking Ombudsman himself

103.. A performance guarantee has been issued on
behalf of its client. The guarantee has been
invoked by the beneficiary. There is no
sufficient balance in the account of the client.
  • A.. The Bank can postpone paying the guarantee
  • B.. The Bank has to honour the claim
  • C.. Later on they can rely on Counter guarantee
    to recover
  • D.. Both B C

104..On a Bank Guarantee, the court will not
interfere, since it is a commitment by an
individual banker to the beneficiary.
  • A.. True
  • B.. False
  • C.. Unless a fraud or forgery the court will not
  • D.. None of the above

  • 105.. Banks generally issue Performance
  • Advance payment , Deferred payment and
    Statutory guarantees are also being issued by
  • Before issuing a bank guarantee, the bank
    will go through the draft copy and after
    satisfying with the contents they agree to
  • Besides the documents for various types of
    securities, appropriate counter guarantee also to
    be obtained..
  • Even if the guarantee is backed by 100
    margin, the counter guarantee/ counter indemnity
    has to be obtained on a stamp paper to avoid
    complications later on.

  • 106.. Amount of guarantee, period, protective
    clause, claim period , beneficiary are some of
    the important aspects which are to be clearly
    understood and put in place to avoid
    complications at a later date.
  • .. If claim has come from the beneficiary utmost
    importance to be given and due action to be

  • 107..A guarantee given by the customer favouring
    the bank in turn for the bank giving a guarantee
    on behalf of the customer to a third party. It is
    more or less a guarantee-cum-indemnity.
  • a.. Back to back guarantee
  • b.. Secondary guarantee
  • c.. Commitment of the client
  • d.. None of these

108..Reimbursing bank is appointed by
  • A.. Negotiating Bank
  • B.. Confirming Bank
  • C.. Paying Bank
  • D.. None of the above

109.. The Red Clause LC and Green Clause LC are
one and the same.
  • A.. True
  • B.. False
  • C.. Green Clause LC is the refinement of Red
  • D.. Both are ordinary LCs.

110..The Combined Transport Bill is known as
  • A.. Multiple Bill of exchange
  • B.. Multiple Bill of Lading
  • C.. Multiple Bill of Entry
  • D.. Multimodal Transport.

  • 111..Uniform Customs and Practice for Documentary
    Credits UCPDC 600 came into effect on 1 July
  • A reduction in the number of articles from 49 of
    UCP 500 to 39.
  • The replacement of the phrase reasonable
    time for acceptance or refusal of documents by
    a firm period of five banking days
  • New provisions which allow for the discounting
    of deferred payment credits.

  • 112.. A Letter of Credit is a commitment by the
    LC opening bank to the beneficiary (Exporter or
    Seller) to make payment.
  • .. Banks under a LC deal in documents
  • .. LC terms and conditions should not be vague .

  • 113..A Negotiating banker (the bank in the
    beneficiary / Exporters country) negotiates the
    bills (makes payment on the bills drawn by the
    seller and accepts the documents). He is also
    known as Nominated or Paying banker.
  • .. A confirming banker has to undertake on its
    part the liabilities of the credit vis-à-vis the
    beneficiary or the Negotiating bank.
  • .. Reimbursing bank is appointed by the issuing
    bank to make reimbursement to the Negotiating,
    Paying or Confirming bank

  • 114.. The bank in the Beneficiary / Exporters
    country through which the LC is advised to the
    beneficiary is called Advising bank. The other
    name for advising bank is
  • a.. Notifying bank b.. Nominated bank
  • c.. Paying bank d.. Notified bank

  • 115..LCs could be Revocable / Irrevocable
    /Confirmed / With recourse or without recourse/
    Transferable and Back to Back Credits
  • .. The other types include Red clause and Green
    Clause LCs.

  • 116..Red and Green Clause Letter of Credits
  • a.. Anticipatory Credits
  • b.. Ordinary Credits
  • c.. Back to Back Credits
  • d.. Anticipating Credits

  • 117.. LC documents include Bill of exchange,
    Invoice, Transport documents (like Airway bill,
    Bill of Lading, LR,RR,) Post parcel receipts,
    Insurance documents, Packing list, Certificate of
    Origin, Quality certificate and so on

  • 118.. As in the case of Bank guarantee, the
    payment under the LC Banks obligation is
  • .. Exceptional cases the Court would interfere
    with the machinery of irrevocable obligations
    assumed by the banks, such as, clear cases of
    fraud of which the banks have notice.

  • 119.. Bills are classified into inland,
    foreign, demand, Usance, Clean, Documentary.
  • .. Demand bills are always purchased whereas time
    bills are discounted.
  • .. Bills can also be accepted by banks on
    collection basis

120..One instrument need not be stamped. Identify
  • A.. Promissory Note
  • B.. Bill of Exchange
  • C.. Power of Attorney
  • D.. Cheque

121..The Sec 130 of the Transfer of Property
Act, permits assignment of
  • A.. Negotiable Instrument
  • B.. Irrevocable Power of Attorney
  • C.. Actionable Claim
  • D.. All the above

123 Private Ltd Company has availed
Certain credit facilities including a supply bill
limit of Rs. 7.00lacs. Then
  • A .. Charge need not be registered with ROC
  • B.. Since it is a clean advance no charge
    registration required
  • C.. Charge has to be registered with ROC
  • D.. None of the above

123..One of the following need not be accepted .
  • A.. After sight Bill
  • B.. Time Bill
  • C.. Usance Bill
  • D.. At Sight Bill

124..Which is correct?
  • A.. Hypothecated goods will be under the
    possession of the Bank..
  • B.. Under pledge the property pledged will be
    with the pledgor.
  • C.. An Equitable Mortgage Private Sale allowed
  • D.. For Simple Mortgage stamp duty to be paid

125..Generally the banker as a Creditor will
have the right and not the possession in respect
  • A.. Mortgage and Pledge
  • B.. Hypothecation and Mortgage
  • C.. Pledge and Third Party Pledge
  • D.. Hypothecation and Pledge

126..In which type of mortgage possession is
with the mortgagee.
  • A.. Simple Mortgage
  • B.. English Mortgage
  • C.. Equitable Mortgage
  • D.. None of these

127..A bank relying on the contents of their
Pledge agreement, have sold the gold ornaments
without intimating the owner.
  • A.. The Bank is not in order
  • B.. The Bank should have given a reasonable
  • C.. The Bank is perfectly in order otherwise the
    agreement becomes meaningless
  • D.. In case of Hypothecation Notice required and
    not for Pledge

128.. On the strength of the Fixed deposit of
the wife L, the husband D, was given the loan.
Under the circumstances a.. D will execute the
Pledge agreement b.. L will execute the Demand
Promissory Note c.. L will execute the Pledge
agreement and D the Demand Promissory Note. d..
Both of them would execute both the above
129..Which statement is not incorrect?
  • A.. Hypothecation can be converted into Pledge
  • B.. Mortgage can be converted into
  • C.. Pledge can become Mortgage, if needed
  • D.. Assignment represents Negotiation

  • 130.. A customer has tendered an outstation
    cheque to his banker who accepted on collection
    basis. After sending the cheque for collection
    (before realization) at the request of the
    customer the bank has purchased the same. Then
    the relationship between the banker and customer
    would be
  • a.. Agent Principal b.. Creditor Debtor
  • c.. Debtor Creditor d.. Principal - Agent

131..One of the partners of UTVP Co died in
abroad. Then the operation in the account
  • A.. to be discontinued
  • B.. to be allowed
  • C.. to be allowed , if the partnership deed is
  • D.. to follow the contents of partnership deed

  • 132..Bank MN purchased a cheque. The same has
    been returned with the reason Funds
    insufficient. Then the bank which advanced
    finance has to (primarily)
  • a.. Recover the finance from the drawer
  • b.. Recover the finance from the drawee
  • c.. Recover the finance from the payee
  • d.. Forego the advance lent

133..Bank S has terminated the overdraft
account of the borrower B, since his operation in
the account has not been satisfactory.
  • A.. Bank relied on the contents of Overdraft
  • B.. S should have given an opportunity to B in
  • C.. Bank has the right to terminate
  • D.. There is no need for the bank to issue a
    separate notice as the borrower B has to know
    the conditions of the bank.

134..Which type of finance to a Private
Limited Company, charge need not be registered
with ROC.
  • A.. Assignment of Book Debts
  • B.. Life policy of the Managing Director taken
    as collateral security
  • C.. Term Loan for Building
  • D.. Cash credit (Hypothecation of Inventory)

135.. A person has been appointed as the Manager
of the property charged. He has to give notice to
the Registrar of Companies within
  • A.. 30 days
  • B.. 30 days of his appointment
  • C.. 30 days of his taking charge of the post
  • D..30 days from the date of liquidation

  • 136.. Life policy as security will involve
  • a.. Pledge
  • b.. Hypothecation
  • c.. Assignment
  • d.. Both a c

  • 137..A depositor wish to transfer his fixed
    deposit to his brothers name.
  • a.. Not possible since it is already printed on
    the deposit receipt as Not Transferable
  • b.. Possible by way of proper endorsement
  • c.. Possible by closing the deposit before
    maturity and with that open a new account in the
    name of the depositors brother
  • d.. None of the above

  • 138.. There are 6 types of Mortgages.
  • The Transfer of Property Act discusses about
    the Mortgages.
  • The basic requirements include
  • An intention to create mortgage by the owner
    of the property (mortgagor) in favour of the
    Mortgagee (Creditor) to secure a debt

  • 139..(1) The sale is ostensible and not real. (2)
    The mortgagee has the right to receive rent on
    the property mortgaged (3) Mortgage is put
    through in a Notified area (4) Private Sale
    possible- Identify the mortgages
  • a.. Simple Mortgage/ English Mortgage/ Equitable
    Mortgage/ Anomalous Mortgage
  • b.. Mortgage by way of Conditional Sale/
    Usufructuary Mortgage / Mortgage by way of
    Deposit of Title deeds / English Mortgage
  • c.. Registered Mortgage / English Mortgage /
    Equitable Mortgage / Simple Mortgage
  • d.. Mortgage by way of Conditional Sale /
    Equitable Mortgage / Usufructuary Mortgage /
    English Mortgage

  • 140...Identify the correct mode of charge in
    respect of(1) Vehicle(2)Book debts (3)Gold
    ornaments (4) Flat purchase (5) National Savings
  • a.. Pledge / Hypothecation / Hypothecation/
    Mortgage/ Pledge
  • b.. Hypothecation / Assignment / Pledge /
  • c.. Pledge / Mortgage / Hypothecation /
    Assignment/ Hypothecation
  • d.. Hypothecation/ Hypothecation/Pledge/Mortgage/P

  • 141..As per the provisions of the Registration
    Act,1908, a registered document operates, not
    from the date of its registration , but from the
    time of its execution. Thus a Mortgage document
    executed earlier, though registered later than
    another, has priority over the documents executed

  • 142.. The limitation period for filing a suit for
    sale of mortgaged property is 12 years from the
    date the mortgage debt becomes due.
  • .. The limitation period for filing suit for
    foreclosure is 30 years form the date the money
    secured by mortgage becomes due..
  • .. Foreclosure means the loss of the right
    possessed by the mortgagor to redeem the
    mortgaged property.
  • .. Under the Mortgage by way of conditional sale,
    the mortgagee can sue for foreclosure, but not
    sale of the property.

  • 143.. A private Ltd company has availed finance
    by way of Simple Mortgage. Then there
  • a.. Will be two types of Registrations
  • b.. One with the Registrar of Companies
  • c.. Another with the Sub Registrar of
  • Assurances in whose jurisdiction the
  • mortgaged property is situated
  • d.. All of these

  • 144.. Hindu Undivided family is governed by
    personal laws. In Bengal and other parts of
    erstwhile Bengal province, a Hindu undivided
    family is governed by Dayabhag Law in other parts
    of India, it is governed by Mitakshara Law.
  • While lending to the HUF business banker has
    to be very careful in protecting the interest of
    the bank

  • 145.. Trusts, Clubs, Co-operative societies ,
    Schools, Colleges etc., lending has to be
    properly understood then to be given.
  • .. The appropriate documents, such as deed,
    agreements, bye laws, resolutions to be carefully
    gone through and then proceed.

  • 146.. A Limited Company applied for Working
    finance on 12th of June. Received the sanction
    letter on 10th of August and executed the loan
    documents on 20th of August. Availed the finance
    on 13th of September only. The charge has been
    registered with the Registrar of Companies on
    16th of September.
  • a.. The Registration is in order
  • b.. The Registration is not in order
  • c.. The Charge should have been filed within 1
    month from the date of sanction
  • d.. Since the finance has been taken only on 13th
    of September, time to be calculated from that
    date to file the charge

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