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Important Questions for promotion test relating to Banking & Finance:A. RESERVE BANK OF INDIA , ITS FUNCTIONS, PAYMENT AND SETTELMENT SYSTEM
1. The present Governor of RBI is Raghuram Rajan.
2. RBI act as the supervisor and regulator of (a) Scheduled Commercial Banks (b) Primary Dealers
(c) Non Banking Financial Companies (d) Assets Reconstruction Companies and (e) Credit
Information Companies.
3. The Regulator of Insurance Sector is Insurance Regulatory And Development Authority
(IRDA).
4. Banks cannot issue demand drafts payable to bearer as it is prohibited under sec 31 of the RBI
Act.
5. Scheduled Commercial Banks maintain CRR as per Sec 42 of the RBI Act.
6. Scheduled Bank is which is included in 2nd Schedule of RBI Act.
7. Rate of interest payable on Govt. Securities is called Coupon.
8. The monitoring of banks by RBI through DSB returns is called off-site monitoring
9. Banks are required to submit to RBI the DSB return II (the report on capital adequacy) at
quarterly interval.
10. In Speed Clearing out station cheques are paid in local clearing by using the CBS facility.
11. Cheques having transaction code 10 for SB, 11 for CD, and 12 for CC and all other type of
transactions like demand drafts which are drawn on CBS branches except Govt. cheques can
be presented in Speed Clearing.
12. In Cheque Truncation System of clearing the banks have to send image of the cheques which
are called e-cheques to the clearing house.
13. National Payment Corporation of India (NPCI) with Head Office in Mumbai formed in 2008
manage and operate the retail payment and settlement system in India.
14. Settlement risk is eliminated in RTGS because of continuous real time settlement on a gross
basis.
15. Biometric ATMs are such ATM that does not require PIN and operates by recognizing the body
features like finger print, irish of the eye, etc.
16. ATMs installed by companies other than banks i.e. ATM without name of Bank is called White
ATM.
17. Maximum Rs.50000/- per customer per day is allowed for payment through mobile banking.
18. CRR balance to be maintained on any day should not be less than 70% of the required CRR.
B. BANKING REGULATION ACT.
1. As per Sec 24 of BR Act, banks to maintain SLR. RBI can vary SLR from 0% to 40% of the
NDTL.
2. SLR is maintained on daily basis with respect to Demand and term liabilities while CRR is
maintained on fortnightly basis on NDTL.
3. As per Sec 21 of BR Act, RBI has power for Selective Credit Control, i.e. to control the purpose,
quantum, margin and interest for different types of advances in certain sectors / commodities.
4. As per Sec 17, banks before declaring dividend must transfer minimum 25% of their net profit to
Statutory Reserve.
5. Banks fulfilling eligibility criteria can declare dividend without prior approval from RBI subject to
the limit of Dividend payment ratio not exceeding 40%.
6. As per Sec 35 A of the BR Act RBI has power to give any direction to banks and banks are bond
to abide by the same.
7. Sec 45Z A to 45ZF deals with nomination in Deposit, safe custody and safe deposit locker.
8. Sec 45z provides that customers may get their paid cheques and they are required to preserve
the same for a minimum period of 8 years.
9. As per Sec 28 of the BR Act bank balance sheet is prepared as per the schedule III of the BR
Act. The total number of schedules in the amended format is 16.
10. Banking is declared as a public utility service under the provisions of Essential Services
Maintenance Act.
11. Banks publish Quarterly results as per the guidelines of SEBI under clause 41 of the Listing
agreement.
12. Statutory Audit of banks is done as per BR Act.
13. Concurrent Audit is done in banks as per the recommendation of Ghosh committee.
14. RBI has asked bank to move to RBIA (Risk Based Internal Audit) from the present system of
transaction audit conducted by banks.
15. As per RBI guidelines Rural centre include all banked centre which has population of below
10000 (Semi Urban – 10000 to 1 lac, Urban – above 1 lac below 10 lac, Metropolitan – 10 lac and
above).
16. Banking which is done as per Shariat (Islamic) principle and does not pay interest on deposit and
does not charge interest on advances is called Islamic Banking or Participatory Banking.
17. Maximum of Four whole time directors a nationalized bank can have.
C. NEGOTIABLE INSTRUMENTS ACT
1. A cheque written in different handwriting, in different colours, in different language can be paid by
the bank.
2. As per RBI Guidelines all banks are required to issue cheque / drafts / banker cheque with effect
from April 1st, 2012 valid for a period of three months.
3. As per Sec 31 of NI Act if a bank wronglfully dishonor a cheque it is responsible to compensate
the drawer.
4. Kite flying refers to drawing accommodation bills (bill drawn without consideration) to arrange
funds.
5. As per Sec 125 of NI Act a cheque can be crossed by drawer, payee or holder.
6. In case of Special Crossing, apart from that it cannot be paid in cash , the cheque has to be paid
only through the bank in whose favour it is specially crossed.
7. In case of Not Negotiable Crossing the transferee will not get better title than the transferor and
therefore there will be no holder in due course in such cheque.
8. Account Payee Crossing which is direction to collecting bank, in not defined in NI Act, it is
in practice.
9. As per RBI directive Account Payee Cheque has to be credited to the account of payee only and
cannot be endorsed to other person.
10. In case of return of cheque due to insufficiency of fund the maximum punishment can be up to
two years imprisonment and/or fine up to twice the amount of the cheque or both.
11. Cheque presented for payment bearing date prior to the account opening date or cheque issue
date can be paid by the bank.
12. If Cheque of Rs. 1 crore and above are returned in an account for more than four occasion during
financial year due to insufficiency of funds the bank has to stop issuing fresh cheque book and
the bank may even consider closing the account in such cases.
13. In case of dishonour of cheque due to insufficiency of fund, Notice is given to drawer within 30
days of the receipt of the information of dishonour of cheque from the bank demanding the
payment within 15 days from the date of receipt of the notice. If the drawer does not make
payment within 15 days, there arises a cause of action for filling the criminal suit within one
month of the cause of action.
D. BANKER CUSTOMER RELATIONSHIP:
1. The Customer is not defined in any Act. The term customer has been defined in the KYC
guidelines issued by RBI.
2. As per Indian Contract Act in case of safe custody, the relationship between the bank and
customer is that of a Bailee and Bailor.
3. In case of safe deposit locker, the relationship between the bank and customer is that of
Lessor and Lessee.
4. Maintaining secrecy of the account is per the provision of implied contract under Indian
Contract Act.
5. The Incharge of the police station is empowered to ask for information or copy of any
document and bank are bound to comply with the same as provided in Sec 102 of
Criminal Procedure Code 1973.
6. Income Tax Attachment order are issued under Sec 226 of IT Act.
7. Income Tax Attachment order attaches credit balance in the account which are held in
the same capacity in which the order is issued.
8. A fixed deposit a/c yet to mature can also be attached by Income Tax Attachment order.
9. If the IT attachment order is issued in the name of “A” but account is in the name of “A &
B”, 50% of the balance can be attached (attachment on pro rata basis).
10. The IT attachment order can also attaches credit / deposit received after the receipt of
the order.
11. IT attachment order can attach the amount in the deceased depositor.
12. Garnishee Order is issued under the Rule 60 of the Code of Civil Procedure 1908.
13. In Granishee Order extend to those account only which are held in the same capacity. It
cannot attach the account of an individual having account in joint name with other
person (different than IT attachment order).
14. A fixed deposit a/c yet to mature can be attached by Garnishee Order.
15. Garnishee Order cannot attach the amount in the deceased depositor (different than IT
attachment order).
16. Garnishee Order cannot attach credit / deposit received after the receipt of the
order(different than IT attachment order).
E. SPECIAL TYPES OF CUSTOMERS:
1. As per Sec 3 of the Majority Act, a minor is a person who has not completed 18 years of
age (both under natural guardian or guardian appointed by court).
2. Persons incompetent to contract are Minor, Lunatic and Insolvent.
3. A minor cannot become a partner of a partnership firm; he can be admitted to the benefit
of the partnership. He is not liable for any liability of the firm except to the extent of his
share in the firm. On majority he has to choose within SIX months to remain as a partner
or leave the same.
4. RBI has asked all banks in June 2008 to provide all types of banking facilities to the
visually challenged without discrimination.
5. The missing person can be declared dead after seven years from the date of missing by
the competent court under Sec 108 of the Indian Evidence Act.
6. HUF cannot become partner of a partnership firm and also two HUF cannot form a
partnership firm.
7. As per RBI guidelines there is no restriction in number of persons in a joint account.
8. In case of NRE deposit account, maximum number of NRIs who can join to open account
is Four.
9. Sec 11 of Company Act 1956, provides that the number of partners of a firm carrying on
banking business should not exceed 10 and that carrying any other business 20. An
association of more than 20 persons are Illegal association.
10. It is not compulsory to register a firm. However the partner of an unregistered firm cannot
sue the firm or any other partner of the firm. Also the firm cannot sue third parties to
enforce its rights arising out of contract.
11. A partnership firm can register itself at Registrar of Firms of the state where the Head
Office of the firm is located.
12. A Pvt. Ltd Company can have minimum 2 share holders and maximum of 50 while the
Public Ltd. Company will have minimum 7 share holders and maximum is unlimited.
13. Private limited company must have minimum paid up share capital or Rs. 1 lakh while the
public Ltd. Company minimum of Rs. 5 lakh.
14. Pvt. Ltd. Company will have restriction in transfer of share hence cannot be listed and
traded at stock exchanges, while Public Ltd. Company shares are freely transferable
hence can be traded and listed in stock exchanges.
15. A Private Ltd. Company can commences it business immediately after its formation while
a public Ltd. Company can do so after issue of certificate of commencement of business
from the ROC after the subscription of the minimum share capital by the company.
16. The Board of Directors of privet Ltd. Company has power to borrow any amount while
that of public Ltd. Company can borrow only up to the paid up capital and reserve of the
company.
17. Annual general body meetings of companies should be held within a maximum interval of
15 monthsfrom the previous meeting. The first general meeting is to be hela within a
period of 18 months of the formation of company.
F. PARA BANKING :
1. Para Banking-Activities like Insurance, Mutual Funds, Credit Cards, Retail Sales of Gold,
stock broking, acting as Depositories, providing leasing/ hire purchase and factoring
services etc are called Para Banking Products.
2. Bancassurance means distribution of insurance product through banks.
3. Key man insurance is an insurance policy taken on the life of the person who is very
crucial for business unit.
4. Floater Policy in case of health policy means the policy covers all the persons named in
the policy subject to total claim up to the amount of the insurance policy.
5. A contract of insurance is a contract of Indemnity.