Transcript Document

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 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
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
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
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.. RBI’s 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/-
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
Government
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.. RBI’s 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 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
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, cooperation 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.
a. It is not 50 but 200
b. They need not hold any qualification shares
c. They need to have minimum qualification shares of 10
as per the provisions of Banking Regulation act and not
RBI act
d. 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
b. Non-acceptance of application for loans without
assigning valid reasons to the applicant
c. Non-issuance of Demand Drafts to noncustomers
d. 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 auditor’s 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.
52..The issued capital of the
Regional Rural Bank is held as
15 %:50%:35% 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 auditor’s 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.
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
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
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 customer’s 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
customer’s 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
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 Drawer’s Bank will not make the payment
D.. The Drawee Bank will not make the payment.
79.. A cheque has been received by the drawer’s 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 drawer’s
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 protection
D.. All of these
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
82.. A cheque has been paid
bearing a visible alteration on the
payee’s 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
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.
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..
B..
C..
D..
The Collecting bank will get protection.
The Paying bank will get protection
The Collecting bank will be held responsible
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 bank’s 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.
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.
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 L’s current account with the claim amount and
make a demand draft in favour of R and send.
b. Before doing so Bank K to consult L and take his
permission.
c. Bank K to discuss with R
d. 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. 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 Banker’s
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.
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 amount.
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 interfere
D.. None of the above
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.
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.
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 Clause
• 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 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.
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 / Exporter’s 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
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.
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
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
123..One of the following need not be
accepted . Identify
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 of
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
intimation
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 documents.
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
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
silent
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
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.
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 brother’s 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 depositor’s 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 Certificate
a.. Pledge / Hypothecation / Hypothecation/ Mortgage/ Pledge
b.. Hypothecation / Assignment / Pledge / Mortgage/Pledge
c.. Pledge / Mortgage / Hypothecation / Assignment/
Hypothecation
d.. Hypothecation/ Hypothecation/Pledge/Mortgage/Pledge
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
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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