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INSTITUTE OF BANKERS IN MALAWI
MAY 2012
SUBJECT: INTRODUCTION TO BANKING (IOBM-C104)
SECTION A
1. A person will qualify to be a bank customer if he satisfies the following as a condition:
a. Maintains an account with a bank
b. Regularly makes deposits and withdraws at a particular branch on behalf on
his employer
c. Is well known to staff members of the bank
d. Has good balances in his account
2. A bank should not compulsorily close a customer’s account unless:
a. The customer is known to be a thief
b. The bank gives reasonable notice to allow customer make alternative
banking arrangements
c. The bank is tired of dishounoring cheques due to lack of funds
d. The customer is linked with money laundering activities
3. The duty of confidentiality demands that a banker should not divulge any information on
the customer’s account except in one of the following cases
a. Customer is fond of issuing cheques against uncleared funds
b. Customer is a minor without legal capacity to conduct a bank account
c. Customer is illiterate
d. Customer’s conduct is posing a threat to national security
4. Customers can play a role to assist the bank in preventing fraudulent transactions and one
such role would be to:
a. Closing the account each time a fraudulent transaction is suspected
b. Issuing post-dated cheques
c. Maintaining a similar handwriting on all cheques and bank withdrawal
instructions
d. Informing the bank without delay if he discovers cheques that appear to have
been forged.
5. Which of the following statements is true about a savings account?
a. Savings accounts are good for people living in the rural areas
b. Savings accounts assist countries to mobilize foreign exchange
c. Savings accounts require account holders to maintain a minimum balance in
the account at any one time.
d. Savings account assist to fight inflation in an economy.
6. Which statement is false about unique features of a fixed deposit account
a. A fixed deposit can be attached to an ATM card
b. A fixed deposit earns higher interest rates than an ordinary savings account
c. Money is not readily available for withdrawal on demand without risking penalty
charges
d. In times of hyperinflation, interest earned may not be sufficient to cover inflation
7. One of the following statements is not true about general clearing rules
a. Once cheques are accepted for clearing, value is obtained the same day.
b. Cheques are scanned and cleared through to the drawer’s bank in form of images
c. Data files are transmitted for payment in electronic format.
d. Settlement of values of cheques exchanged is done through accounts maintained
at the Reserve Bank of Malawi.
8. Choose one reason that contributed to the failure of barter trade to remain popular as a
means of exchange.
a. Traders were deliberately giving each other rotten items
b. Most traders could not accept animals to exchange their commodities with,
c. The system was solely dependent on double coincidence of wants
d. The system required that traders should know each other personally to avoid
cheating.
9. A drawer on a cheque is a person who has:
a. Signed the cheque
b. Will receive payment on the cheque
c. Has endorsed the cheque
d. Reported a forgery on a bill of exchange
10. Identify a correct list of different types of endorsements
a. Simple endorsement, endorsement in blank, restrictive endorsement.
b. Simple endorsement, endorsement in blank, restrictive endorsement and qualified
endorsement
c. General endorsement, simple endorsement and qualified endorsement.
d. Simple endorsement, special endorsement, restrictive endorsement and
qualified endorsement.
11. One of the following statements is true about the usage and significance of a crossing on
a cheque.
a. Crossings prevents encashment of cheques over the counter
b. Crossings are necessary when dealing with cheques with large amounts
c. A crossing should always have a reason between the two transverse lines
d. Crossings are necessary on company cheques only.
12. Why should the authorities control money supply?
a. Uncontrolled money supply causes currency devaluations
b. Uncontrolled money supply causes instability of prices of goods and services in
an economy.
c. Uncontrolled money supply attracts aid freeze from donors
d. Uncontrolled money supply is only good for businesses in the private sector.
13. Which of the following assets are traded on the secondary market?
a. Stocks, shares and treasury bills
b. Stocks, fixed deposits, or treasury bills
c. Mortgages, fixed deposits, or cheques
d. Stocks, shares and overdrafts.
14. What is the name of the policy which the authorities implement to ensure proper
functioning of the financial system in an economy?
a. Fiscal policy
b. Monetary policy
c. Investment policy
d. Financial policy
15. Mention the rate which the central bank uses when lending to banks as a lender of last
resort.
a. Overdraft interest lending rate
b. Fixed deposit interest rate
c. Discount rate
d. Treasury bills rate
16. Excess liquidity can cause inflation and the central bank tries to control it using one of
the tactics:
a. Open Market Operation
b. Printing less currency notes
c. Using coins as opposed to bank notes
d. Encouraging people to use plastic money or electronic transfers
17. Banks that fail to observe Know Your Customer (KYC) procedures risk to be slapped
with the following punishment
a. Pay fine of MK100,000 plus 2 years imprisonment
b. Pay fine of MK500,000 plus loss of business licence
c. Pay fine of MK10,000,000 plus loss of business licence
d. Pay fine of MK15,000,000 plus loss of business licence
18. What period (s) are treasury bills classified in? page 66
(a) 91 days only
(b) 73 days and 146 days only
(c) 91 days, 182 days and 273 days only
(d) 90 days, 180 days, 270 days and 360 days only
19. Name the step that bankers extract information to determine the level on income of a
prospective customer when opening an account
a. Customer screening
b. Customer identification
c. Customer acceptance
d. Customer profiling
20. The most important aspect employers in service industry must emphasize in order not to
lose customers
a. Positive attitude of staff towards customers
b. Incentives to customers
c. Value added services
d. Improved technology
21. The name of the market where companies raise long term funds for the investments
a. Money Market
b. Foreign Direct Investments (FDI)
c. Treasury Market
d. Capital Market
22. The process which has been responsible for growth of money supply through banks
lending.
a. loans
b. Overdrafts
c. Credit creation
d. Discounting
23. The cheque which customers get when paying for goods and services in the currency of
another country.
a. Bank certified cheque
b. Promissory note
c. Foreign bank draft
d. Telegraphic transfer
24. Service customers will require when asking for immediate clearance of a cheque drawn
in the same city.
a. Special clearance
b. SWIFT
c. Telegraphic transfer
d. Cashing credits
25. Facility which will allow customers’ cheques to be readily acceptable by merchants and
other service providers as long as the banks conditions are met.
a. Bankers status report
b. Performance bond
c. Cheque guarantee card
d. Credit card
26. What is the minimum investment amount on a REPO?
(a) K250,000
(b) K10,000
(c) K1,000
(d) K100,000.
26. A Word referring to a cheque that was issued more 6 months ago and cannot be
accepted for payment.
a. Past due
b. Overdue
c. Post-dated
d. Stale
28. The motive that drives people to hold money to help them meet unforeseeable monetary
obligations
a. Speculative motive
b. Precautionary motive
c. Transaction motive
d. Gambling motive
29. The role which banks play in the economy by mobilizing deposits from surplus units to
make it available to deficit units.
a. Financial intermediation
b. Financial integration
c. Credit concentration
d. Investment financing
30. The wording in a crossing which signifies that the cheque has lost all the elements of
transferability and negotiability.
a. Account payee only
b. Not negotiable
c. Not transferable
d. & Company
SECTION B
QUESTION 2
2a. Explain in detail what banks should do in order to help in the fight against money laundering.
10 marks
2b. what are the known evils of money laundering which would support the assertion that money
laundering adversely affects the economic development of a country
10 marks
TOTAL 20 MARKS
Recommended answer
Page 131
a. Report suspicious activities to the responsible authorities. In Malawi, these are reported
to the Financial Intelligence Unit
b. Observe KYC when opening accounts
c. Monitor deposits into the accounts. Report large sums that surpass the thresholds
d. Monitor Withdrawals and trends in the accounts. Information obtained in the profiling
stage is useful.
e. Train staff to be conversant with money laundering issues and keep abreast of events.
B page 131
Students need to demonstrate that they understand that proceeds of money laundering come from
illegitimate sources. These include sale of fire arms, illicit drags, human trafficking etc. All these are evil
acts which deprive other people of their well earned money.
2 marks
These proceeds are not transferred for purposes of investment but to afford a way of disguising the
source of funds and the culprits behind the money
2 marks
The money is also largely used to finance further crime
2 marks
Laundered money creates distortions in the market since huge sums of money would flow into an
economy and create inflation and yet in no time the money will be moved out
2 marks
Usually the investments are for speculative means in which case the money will be for short periods
2mark
QUESTION 3
All forms of money have common attributes which help them to fulfill the functions of money
as a medium of exchange. Write brief notes on any 5 attributes of money and for each attribute,
explain how present day forms of money are superior to money used in the barter trade era.
20 marks
TOTAL 20 MARKS
Page 35
a. Acceptability – Money must be widely accepted as a medium of exchange. Old forms of
money were not generally accepted and there indeed required to be double coincidence of
wants.
b. Divisibility – money ought to be used for any size of transaction. When animals and other
forms of commodities were used, divisibility was a great challenge
c. Homogeneity – one piece of money must be exactly the same in quality and value. It was
not possible to maintain same quality of money with barter trade.
d. Indestructibility- durability is also important especially now that economies print large
quantities of bank notes. Some forms of money such as salt, tobacco and tea could not be
kept for too long without losing quality
e. Portability – money form need to be conveniently portable. Slaves, animals etc could not
be carried every where
f. Cognoscibility – easily identifiable as money. All forms of present day money have this
feature whereas the forms of money in barter trade where used in small defined localities
g. Stability in value – very difficult to maintain stability in value. In fact determination of
value was a problem in itself
QUESTION 4
You have been approached by a tobacco farmer who has for so many
savings account and now wants to open a current account.
a. Explain the advantages of a current account which are unique
savings account
b. Write short notes on the following
i. Full bodied money
ii. Credit money
iii. Fiat money
years been operating a
and not available to a
14 marks
2 marks
2 marks
2 marks
TOTAL 20 MARKS
Page 20
A current account offers a cheque book which is not available on savings account. This cheque
books brings along with it the following advantages
- Convenience
- Proof of payment
- Security and safety
- Reconciliation
- Overdraft facility
- Guarantee card facility
- No minimum balance to maintain account
Page 41
Full bodied Money – the commodity that is used as money is perceived to possess the same
value as the piece of money. In this case, money is not worthless paper.
Credit money – money not supported by assets like gold, silver etc. ie bank deposits.
Fiat Money – legal tender which is widely accepted as money. A means for discharging
financial obligations. The printing of such money is not supported by any items of intrinsic
value.
QUESTION 5
You have been asked by your manager to give a talk on things that should be avoided or born in
mind in order to provide superior customer service. As you prepare, list at least 10 points and
support each point with well thought through facts.
TOTAL 20 MARKS
Page 138
1. Show that you are interested in the customer
2. Give customer a cheerful greeting with a friendly smile
3. Develop listening habit
4. Look at your customer while talking
5. Do not try to handle a transaction you are not familiar with.
6. Be alert to any indication that shows that customer is displeased and dissatisfied
7. Never say no without an explanation
8. Always remember that the affairs of a customer have to be kept secretly.
9. To prevent needless misunderstandings, explain what you are doing and why it must be
done.
10. Say no tactfully- avoid postponing your NO as it may be misleading.