INDIAN%20INSTITUTE%20OF%20BANKING%20

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Title: INDIAN%20INSTITUTE%20OF%20BANKING%20

1
INDIAN INSTITUTE OF BANKING
FINANCEJAIIBMODULE (A B) LEGAL ASPECTS OF
BANKING OPERATIONSThursday 17 APRIL 08T M C
VASUDEVAN
2

01..Identify which one is treated as the
secondary business of a banka.. Accepting
Depositb.. Lending Moneyc.. Issuing Demand
Draftd.. Making Investments

02..Banking is defined in the Banking Regulation
Act.
Primary function to accept deposit, lend and
invest.
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

4
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
only
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
providers

6
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
Government

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
Government.
.. 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
interest
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/-

13
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

16
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

20
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

22
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
Government

24
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

26
25..The Commercial Banks were Nationalised as
per

..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
are
a.. 14
b.. 06
c.. 19
d.. 20

27.. In addition to the conditions applicable to
domestic banks, for foreign banks RBI will look
into
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
companies
C.. Whether the company complies with the
provisions of the BR Act as applicable to foreign
companies

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

31
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
on.

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
deposit

35.. RBI issues directions from time to time
regulating the lending operations of banking
companies
..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
moneylenders
..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
branches

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
appropriation.
.. 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
reports

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.

53
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
involving
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.

59
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

60
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
relates
C.. 20 days from the end of the month to which it
relates
D.. 30 days from the end of the month to which
it relates

61
60.. Banking Ombudsman is

A.. Discontinued and a new company has been set
up.
B.. Not applicable to delays in receipt of export
proceeds
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
words
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
endorsements
b. It is not the responsibility of the
paying banker to verify the regularity of
endorsements
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

79
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
drawers
authentication
c.. The above is not a material alteration.
d.. The responsibility lies with the collecting
banker and not
the paying banker.

81
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
protection
D.. All of these

82
81..Which cannot be transferred by way of an
assignment

A.. The right on receivables
B.. The right over a Term deposit of the Bank
C.. The right over an Life Policy
D.. None

83
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
1881
B.. Will get protection under Sec89 of NI Act
1881
C..Will get protection under both these sections
D..Will not get protection under both these
sections

84
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
position.
D.. The material alteration will to some extent
alter the position.

85
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
responsible
D.. Both banks are responsible

85..A Collecting banker should act in good faith.
He should collect cheques only for his
customer
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
opened.

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
subsisting.
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
subsisting

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
indemnified,
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
bank
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.

100

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
place.

101

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
permission.
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

102

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.
Then
a.. Bank has to refuse payment
b.. Bank to honor the guarantee commitment at any
cost
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
cheque.
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
informed.

103
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

104
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
amount.
B.. The Bank has to honour the claim
C.. Later on they can rely on Counter guarantee
to recover
D.. Both B C

105
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
interfere
D.. None of the above

106

105.. Banks generally issue Performance
guarantees.
Advance payment , Deferred payment and
Statutory guarantees are also being issued by
banks
Before issuing a bank guarantee, the bank
will go through the draft copy and after
satisfying with the contents they agree to
issue.
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.

107

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
taken.

108

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

109
108..Reimbursing bank is appointed by

A.. Negotiating Bank
B.. Confirming Bank
C.. Paying Bank
D.. None of the above

110
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
Clause
D.. Both are ordinary LCs.

111
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.

112

111..Uniform Customs and Practice for Documentary
Credits UCPDC 600 came into effect on 1 July
2007.
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.

113

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 .

114

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

115

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

116

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.

117

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

118

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

119

118.. As in the case of Bank guarantee, the
payment under the LC Banks obligation is
primary.
.. 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.

120

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

121
120..One instrument need not be stamped. Identify

A.. Promissory Note
B.. Bill of Exchange
C.. Power of Attorney
D.. Cheque

122
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
122..xyz 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

124
123..One of the following need not be accepted .
Identify

A.. After sight Bill
B.. Time Bill
C.. Usance Bill
D.. At Sight Bill

125
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

126
125..Generally the banker as a Creditor will
have the right and not the possession in respect
of

A.. Mortgage and Pledge
B.. Hypothecation and Mortgage
C.. Pledge and Third Party Pledge
D.. Hypothecation and Pledge

127
126..In which type of mortgage possession is
with the mortgagee.

A.. Simple Mortgage
B.. English Mortgage
C.. Equitable Mortgage
D.. None of these

128
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
intimation
C.. The Bank is perfectly in order otherwise the
agreement becomes meaningless
D.. In case of Hypothecation Notice required and
not for Pledge

129
128.. On the strength of the Fixed deposit of
the wife L, the husband D, was given the loan.
Under the circumstancesa.. D will execute the
Pledge agreementb.. L will execute the Demand
Promissory Notec.. L will execute the Pledge
agreement and D the Demand Promissory Note.d..
Both of them would execute both the above
documents.
130
129..Which statement is not incorrect?

A.. Hypothecation can be converted into Pledge
B.. Mortgage can be converted into
Hypothecation
C.. Pledge can become Mortgage, if needed
D.. Assignment represents Negotiation

131

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

132
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
silent
D.. to follow the contents of partnership deed

133

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

134
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
agreement
B.. S should have given an opportunity to B in
writing
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.

135
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)

136
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

137

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

138

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

139

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

140

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

141

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

142

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
later

143

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.

144

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

145

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

146

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.

147

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