STATE BANK OF HYDERABAD

HUMAN RESOURCES DEVELOPMENT DEPARTMENT, HEAD OFFICE, GUNFOUNDRY, HYDERABAD. QUESTION BANK RATIONALES
Q.No.1 RBI has directed banks to open NO FRILL a/cs.

Ans: 1] To facilitate common man to open bank a/c at nominal cost. 2] To help common man to cultivate banking habits. 3] To achieve the target of Financial Inclusion. Q.No.2 Bank Guarantee is issued for definite period. Ans: 1] These are contingent liabilities which may crystallize into actual liability. 2] The risk of crystallisation is very high when guarantees are issued for long/ indefinite period. 3] The bank has to provide capital. 4] These are RBI restrictions.
Q.No.3 Cheque Truncation System is introduced. Ans: 1] Capture image of cheques and restricts their physical movement. 2] This will speed up the collections. 3] To prevent the possibility of frauds. 4] To control the complaints of missing of instruments. No.4 Attention is being paid to Credit Risk Management. Ans: 1] It is the most important of all the risks. 2] It helps in managing risk of exposure, default and risk of deterioration in the standing of the borrower. 3] Credit risk is managed through use of covenants, collateralisation, managing concentration and capital allocation in relation to risk, risk return optimisation. Q.No.5 Mobile Banking is introduced in banks. Ans: 1] Mobile phones can be used as a medium of banking services. 2] The rapid growth in users and wider coverage of mobile phone network has made it an important platform for extending banking service. 3] It is cost effective. 4] It will attract new generation customers. 5] Nationalised banks can meet the competition. 6] In order to ensure the level playing field for our bank in comparison of Foreign/Private banks.

Q.No.6 We have introduced new current account product titled as Power Jyoti. Ans: To provide fee / donation collection facility to the institutional customers. This will reduce paper work, manual work and transaction cost to a considerable extent. Current account will give no cost deposits to the bank. We can collect fees/commission for each transaction to compensate the cost incurred by us. Q.No. 7 We have to inform rules, service charges etc. to customers at the time of opening of Savings Bank accounts. Ans: As per the code of BCSBI, accepted by us and as a measure of fair dealings with our customers we have to maintain transparency in our dealings with the customers. If we do not inform it to the customers, it may invite complaints from the customers. It will build a better image of the bank. Q.No.8 Welcome Kits consisting of ATM Card are issued to new SB account holders. Ans: To ensure good customer service. Customers can use them immediately. To meet the competition. This will help us to attract new generation customers. Q.No.9 HRMS project is implemented in our bank. Ans: To manage the human resources properly. Deployment of staff, proper person for proper place can be implemented effectively. Back office operations in respect of staff can be centralised at one place. This will provide more time to the staff at branches for business development work. Q.No.10 Emphasis is given on KYC. Ans: To safeguard banks from being used for conversion of funds acquired through illegal means into legal money. To prohibit use of banking channels for movement of illegal funds acquired through criminal activities or unethical practices in business. To check financing for terrorism activities through banks. To help the Banks to control frauds, money laundering and suspicious transactions. To enable banks for scrutinising high value cash transactions. Q.No.11 Very high Current Ratio is not a good sign. Ans: Very high current ratio is an indicator of in-efficient working capital management. There is a risk of manipulation in quality, quantity, rate of the current assets, which may result in wrong decision. There is a possibility of hoarding of stocks, accumulation of non moving stock, long unrealised debts etc.

Q.No.12 Documents are to be filled in completely before execution. Ans: Documents are proof of availment of the loan/advance. If documents are not completely filled-in before execution, the borrower may object the genuinity of the matter filled-in subsequently. He may disagree to repay the loan on the grounds that he was not aware about all the terms and conditions of the loan. It is not a good practice as the procedure will not be transparent. Q.No.13 Outstanding entries in System Suspense Account are to be reconciled promptly. Ans: Outstanding entries in System Suspense account indicate inefficiency in the system and lack of control over operations. System Suspense account is very sensitive and may result in fraud. Entries in this account reflect that the accounting process is not complete and may put bank into trouble in case of deficiency in services. Bank has to make provision for long outstanding entries, which will affect the profitability of the bank. Q.No.14 Credits from foreign remittances are only accepted in NRE accounts. Ans: Balance outstanding in NRE account is freely repatriable to foreign country. RBI has put these restrictions to prohibit remittance of Indian funds to foreign country. However certain current income is permitted to be credited to the NRE account. Q.No.15 RBI has made it mandatory to obtain letter from customer if he does not wish to give nomination. Ans: Nomination is mandatory facility available to the customers. Nomination facilitates the banks to speed-up the claim settlement in case of deceased customer. Letter from the customer will confirm that the customer has taken a conscious decision for not giving any nomination for his deposit account. Q.No.16 Agriculture Cash Credit and normal Cash Credit are same in nature but their interest application frequency is different. Ans: Interest on ACC is applied at the time of the harvesting but interest is applied on monthly basis on normal cash credit account. The agriculturist gets income on selling the produce after harvest. In case of normal cash credit the income will be received on daily or monthly basis hence interest application frequency is changed. Q.No.17 Loan for milch animals is disbursed in two phases. Ans: Loan is released for purchase of milch animal and second instalment is released after 6 months to ensure that one animal will give milk during dry period of the other animal for continuous income generation for the borrower. The repayment of loan will be regular.

Q.No. 18 Base Rate mechanism for interest on loans and advances is introduced. Ans: Base Rate mechanism is expected to bring transparency in the interest rate system. It is aimed to protect the interest of small borrowers. It will put an end to cross subsidisation. It will bring transparency in pricing of loans by banks. Q.No.19 Banks are giving importance to Customer Relationship

Management Ans: The markets have now become buyers markets and Banking & financial services are no exception. In the Buyers market customer is the king. To withstand the competition and to increase the customer lifetime value, it is necessary for the banks to focus on CRM. Q.No.20 Under SARFAESI Act 2002, Possession Notice should be published in two news papers. Ans: As the possession of the property is taken over by the Secured Creditor, it is a notice to the public as well as to the borrower informing them of the fact and cautioning them not to deal with the said property. Q.No.21 Realistic repayment schedules to be fixed. Ans: Banks to ensure that while granting loans and advances, realistic repayment schedules are fixed on the basis of cash flows with borrowers. This would go a long way to facilitate prompt repayment by the borrowers and thus improve the record of recovery in advances
Q.No.22 Risk Management has assumed great significance in banking

scenario
Ans: Risk can be defined as potential loss from a banking transaction (in the form of a loan or investment in securities or any other kind of transaction undertaken by the bank for itself or for customers), which a bank can suffer due to variety of reasons. The basic objective of risk management is to safeguard the stake holders value by maximizing the profit and optimizing the capital funds for ensuring long term solvency of the banking organization. As a part of payment system reforms, RBI had initiated several measures to reduce risks, especially settlement and systemic risk.

Q.No.23 Exporters do not accept revocable Letters of Credit opened in their

favour. Ans: a) Revocable letters of Credit will be revoked by the Opening Bank without notice to the beneficiary. b) Banks do not take-up financing the beneficiaries of the revocable letters of credit. c) The exporter runs the risk of loss due to abrupt revocations. d) Such Credits have ceased to be operative in trade.
Q.No.24 UCPDC is amended from time to time by International Chamber of

Commerce. Ans: a) The business environment has undergone change. b) Technology upgradations, Computerisation have necessitated the ICC to update & amend the UCPDC. c) Emerging new software under SWIFT, Developments in transportation, Banking etc. have also necessitated amendments.
Q.No.25 Promoting Farmers Clubs is beneficial to the Bank.

Ans: Farmers club formation is based on the principle Development through credit. It enables the farmers to adopt improved practices for their development. Because of their voluntary participation, the change process will be faster. We can as well make use of the Clubs to inculcate proper credit discipline among the farmers.
Q.No.26 Group cohesion is the important parameter for considering SHG

linkage. Ans: As long as group dynamics are evident, the group performance will be satisfactory. Group cohesion can be assessed in terms of, group meetings, maintenance of accounts, transparency in operations etc. All these parameters are taken into account before extending the linkage.
Q.No.27 Staff accounts should be scrutinised thoroughly by the Branch

Manager at regular intervals. Ans: With a view to ensure that such accounts are conducted properly and that no transactions of an unusual nature (involving large amounts disproportionate to known sources of their Income) are being routed through these accounts. Also to prevent possible frauds.

Q.No.28 NPAs have a multiple effect on Banks/financial institutions.

Ans: a) b) c) d) e) They do not earn income; They need provisioning out of the income earned from other assets; The image of the institution with high NPAs is tarnished; The morale of the staff will be low; There will be hesitancy in exercise of delegated power crippling quick decision taking capacity;

Q.No.29 Whistle Blowing is given importance.

Ans: The growing number of frauds and declining ethical values and corruption at high levels made it necessary to introduce a system whereby a check can be had. It will also boost the morale of the lower level people in an organisation.
Q.No.30 Search reports should be obtained from the office of Registrar.

Ans: To enable the bank to know: (i) Whether the title deeds covering the property to be mortgaged are registered or not. (ii) Whether the contents and details of the title deeds submitted for creating mortgage are as per details recorded in the books of the Registrar.
Q.No.31 Financial inclusion - a National priority.

Ans:. Financial inclusion is defined as delivery of banking services, at an affordable cost to vast sections of the disadvantaged and the downtrodden groups, especially in the rural areas. In other words, it aims at providing access to savings, payment and remittance facilities, loans, insurance, etc. by the formal financial system to those who are excluded. Sustainable development can be achieved when rural people are part of the development process and it is education, which unlocks the mental faculty and prepare the so called majority for active participation in this process. Bank nationalization in India marked a paradigm shift in the focus of banking as it was intended to shift the focus from class banking to mass banking. The rationale for creating Regional Rural Banks was also to take the banking services to poor people.

Q.No.32 Paper tokens should be issued to the customers if the SB Pass

Book is not returned updated to the customer. Ans:: This will help identification of the customer when he calls at the branch to collect the Pass book and thereby prevent delivery of the pass book to unauthorised persons and to prevent frauds.
Q.No.33 Control Returns are sent by the branch managers to their

Controllers at stipulated periodical intervals. Ans: Control returns are subjected to scrutiny by the controllers to ensure that the branch manager has exercised his powers within the discretionary powers vested in him to ensure that the sanction of advance conforms to the laid down policies, terms, stipulations of the bank and are in order. This is an administrative tool to ensure that the delegated powers are exercised properly.
Q.No.34 Review /Renewal exercise should be taken up for loan accounts

yearly. Ans: This exercise will show whether the limits sanctioned are commensurate with the results achieved by the firm. This will show the extent of utilization of limits, sale proceeds / whether bills have been routed through the account and whether the account has been conducted properly. Adequate facilities commensurate with current level of operations can be extended. Non review / renewal in time will render the account as NPA.
Q.No.35 The collateral security exemption limit for MSE loans has been

raised to Rs.10 lac. Ans:: MSEs play an important role in increasing the GDP growth rate and providing employment. These could give better performance if their credit requirements are met by the banking system. Due to non-availability of collateral security, MSEs are unable to avail bank loans according to their need. In order to take care of these problem, the Govt./RBI on recommendations of VK Sharma committee recommendation, has enhanced the exemption amount from Rs.5 lac to Rs.10 lac.

Q.No.36 Why Corporate Governance?

Ans: To enhance shareholders value. To protect interest of shareholders, customers, employees and society at large. To ensure transparency and integrity in communication and to make available clear information to all concerned. To ensure accountability for performance and to achieve excellence at all levels. Kumar Mangalam Birla Committee has given various recommendations on it. To provide corporate leadership.

Bank is Correspondents.
Q.No.37

appointing

Business

Facilitator

&

Business

Ans: To provide financial services to the underprivileged encompassing savings, credit, remittance, insurance, pension products in a cost effective manner in unbanked, under banked areas. To improve process efficiency and reduce transaction cost. To increase rural business base, market share. To emerge as a leader in Financial Inclusion.

Q.No.38 Bank Guarantee are not issued for indefinite period.

Ans: These are contingent liabilities which may crystallize into actual liability. The risk of crystallisation is very high when guarantees are issued for long/ indefinite period. The bank has to provide for capital adequacy ratio. There are also restrictions by RBI in this regard.

Q.No.39 Why Cross Selling?

Ans: It is selling additional products/ services to an existing as well as new customers and it fosters brand loyalty. It costs a bank five times less to cross sell an existing client than to acquire a new one. Cross Selling helps bank to plan, implement, and maintain better customer relationship management programmes. Right product at a right time offered to customer. This builds banks image. It helps bank to increase miscellaneous income. To face the competition.
Q.No.40 Alternate Delivery Channels are the need of the hour.

Ans: Several alternate delivery channels such as ATM, Mobile banking, Internet banking, etc. will provide customer satisfaction and convenience. It will decrease the crowd at the counters and give free time to branch operative staff to sell and market products. It will help to improve market share and quality of business. It will help our bank to compete effectively with new forces of the market.
Q.No.41 Operational Risk has been given importance by the Banks.

Ans: It is as per Basel guidelines. Due to significant growth in the banking transaction there is increase in operational risk e.g. Inadequate/failed internal processes, people, system etc. To strengthen the soundness and stability of system. It is an important component of risk management system.
Q.No.42 Any change in the terms and conditions of a loan should be

intimated to a borrower in writing. Ans: As per Fair Practice Code for Lenders. If not intimated to the borrower in writing and his consent obtained, it will not be maintainable in a court of law. The borrower can contest the same and make a complaint to the Banking Ombudsman.

Q.No.43 Banks insist on margin money while sanctioning loans.

Ans: Margin money is the borrower's stake in business or particular transaction. Margin money takes care of possible fluctuations in the market prices of the securities/goods. In case of default, full value may not be realised due to fluctuations and cost involved in effecting sales and handling of securities. Hence banks insist on margin money from borrower.
Q.No.44 Banks are focusing on CASA Deposits.

Ans: CASA deposits are low cost deposits. They are stable and useful for ALM. Since CASA deposits are obtained from a large number of customers, it eliminates the shocks of sudden withdrawals. Customer base will increase which increases cross selling opportunities and revenue to the bank. This is also a way of financial inclusion.
Q.No.45 A Confirmation Letter is sent separately after creation of Equitable

Mortgage. Ans: In order to secure an independent legal proof that mortgagor has willingly deposited the title deeds with intention to create Equitable Mortgage. If the letter is taken simultaneously with the deposit of title deeds then it will attract ad-volarem stamp duty. To avoid pleading by the borrower that the title deeds were left by mistake or were deposited by coercive method.
Q.No. 46 Total reliance on balance sheet and financial statement is not

desirable while arriving at conclusion of health of the unit. Ans: Balance Sheet is prepared on a particular day. There may be a window dressing and deviations from accounting standards. Other factors like labour problems, market availability, and raw material are also important and have impact on performance of the unit and in turn viability of advance. Availability of infrastructure has a greater influence on the performance of the unit and also safety of advance.
Q.No.47 Bank brands the stamp `All our stamps cancelled' while returning

the cheques. Ans:

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 This is done to ensure that the Bank does not incur any liability in future as an agent for collection of the instrument. Holder can renegotiate the instrument through the same or even other Bank. Q.No.48 Though Opening an L/C is a non-fund based transaction, detailed appraisal is required to be carried out. Ans: Though there is no out go of funds at the time of establishing L/C, the Bank's liability can arise if the applicant fails to honour the bill on due date i.e. the non-fund based exposure may result into fundbased exposure. L/C opening is therefore a credit decision, which requires detailed appraisal. Such appraisal enables the Bank to know well in advance, the capacity of the client to honour the bills on due date as also the recourse for the Bank in case of default.
Q.No.49 Pre-sanction inspection is very important.

Ans: To know the exact location of the business. To ascertain creditworthiness, local standing and integrity of the applicant. To examine suitability of location.
Q.No.50 We stop operations in the account of partnership firm on death of a

partner. Ans: On death of a partner, partnership firm stands dissolved. To avoid application of Rule based on Clayton's case. To crystallize the exact liability of the deceased partner as on the date of his death. His survivors cannot be made liable for debits to the account after his death.
Q.No.51 First debit to dormant account should be referred to Branch

Manager/Manager of the Division. Ans: Dormant accounts are a fraud-prone area. Therefore this is an extra precaution to ensure that the customer and his signature are genuine.

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 To establish the bonafides of the payee/endorsee by means of a personal dialogue by a reasonably senior official, before effecting the payment.
Q.No.52 All Field Officers should tour extensively for inspection and follow up.

Ans:
One of the reasons for mounting NPAs is lack of supervision and follow up. If the area of operations is toured frequently by the field officers, then a close rapport can be developed with the borrowers. Helps in regular recovery.

It can also help the field officers to explore the business potentials.
Q.No.53 Articles kept in safe custody should be examined periodically.

Ans: To prevent any possibility of these articles being damaged by white ants and dampness etc. To discharge our duties as that of bailee as per Section 151 of Indian Contract Act.
Q.No.54 Opinion Reports on Borrowers and Guarantors to be updated/ compiled every year.

Ans:
Opinion Reports are compiled to assess the net worth of the Borrowers and Guarantors. This needs to be compiled/updated every year to ascertain any change in the position of their assets & liabilities and to take appropriate steps to safe guard Banks interest. It also helps to identify the details of assets, which may be required to be submitted to the Court for attachment/execution in case of need. Q.No.55 Payment of a Bank draft cannot be stopped by the purchaser.

Ans: While issuing the drafts the Bank receives value well in advance. Hence, the bank cannot go back on its own promise to pay the money, which was received as consideration. Once a draft is issued, the Bank becomes trustee of the funds for the payee. The payee might have got the title to the draft by providing some consideration. Hence payment of draft cannot be countermanded.

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All instruments received for collection at the branch are immediately branded with special crossing stamp before sending these instruments for clearing.
Q.No.56

Ans: When instruments are branded with crossing stamp, these becomes payable to the Bank to which it is crossed. When branded immediately (with crossing stamp), in the event of loss (inadvertently) these cheques cannot be deposited with other Banks. (cheques crossed to more than one Bank are not paid unless the other Bank acts as a collecting agent of the said Bank).
Q.No.57 Turnover in a Cash Credit Account has to be carefully monitored.

Ans: To check whether all sales realizations are routed through the account as per the Banks requirements. As a measure of effective supervision and follow up. To observe the level of operations with a view to judge assess the need for enhancement or reduction in the limits. To check diversion of funds through some other accounts opened at other Bank(s).
Q.No.58 A cheque drawn by a Director of a Company on its account can be

paid even after the death of the director. Ans: A company is an artificial person having a separate legal entity with perpetual succession. Company does not die even if the director dies. As the director is operating the Companys account in his capacity as a director and not in his individual capacity, such cheques can be paid even after the death of the director.
Q.No.59 Job rotation in the Bank is done periodically.

Ans:
To avoid frauds arising out of the monopoly of the specific employees handling specific areas. To drive out monotony.

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 Development of the people by providing them with an opportunity to handle different types of jobs on a regular basis. To avoid the effect of indispensability of selfish people. To ensure that the Banks work does not suffer in the absence of anybody. Q.No.60 Rectification of irregularities in Inspection & Audit Report should receive top priority.

Ans:
Improves safety of the branch business immediately. Frauds prevention and preventive vigilance measure. It also helps the branches for achieving upgradation in rating during the next inspection exercise. Q.No.61 Bank cannot sell pledged goods without notice to borrower.

Ans:
It is essential as per the provisions of Indian Contract Act. The pledger can procure a better bidder in the interest of himself as well as the Bank. To avoid legal complications arising out of any possible objections by the pledger. For e.g. the stocks are being sold cheaply. Q.No.62 Bank does not insist on stamped indemnity letter for issuing duplicate

TDR. Ans: TDR is a not a negotiable instrument & therefore not transferable by endorsement and delivery. It is only a receipt and becomes payable only at the branch where it was issued.
Q.No.63 We obtain periodically stock statements in case of hypothecated

advances. Ans: To ensure that the outstandings in the account are fully covered by the advance value of the goods hypothecated. To ensure that there is healthy/regular turnover of stocks. To ensure that there are no overdue/sticky bills, unrealised for a long time.
Q.No.64 Password secrecy is observed in Branch.

Ans: Password secrecy protects bank and save us from future loss and misuse by fraudsters. The sensitive information can be used by unscrupulous elements

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for own vested interest. Fraud committed can cause loss to individual and organization. More than that it can cause reputation loss for the organization.

Q.No.65 Credit Risk Assessment (CRA) system has been stipulated by the

bank. Ans: Under this system the advances granted to the borrowers are rated on the basis of certain parameters. By this the risk content is assessed. This system is useful to stipulate suitable interest rates for the advances based on the rating. This system helps the bank to take a suitable credit decision for extending further limits.
Q.No.66 Government Business has to be given a lot of

importance.
Ans:

It contributes to the bottom line directly by means of commission income. No need for any outlay of funds/ capital adequacy. It gives scope for close rapport with various Govt. Departments. It gives vital business leads
Q.No.67 Why the legend "Payable at State Bank of Hyderabad

Branch" should be noted in all the Usance Bills immediately after acceptance? This would be giving a notice to the drawee that he should come over to that branch for retiring the bill. Otherwise as per NI Act the usance bill has to be again presented to the drawee for payment on the due date.

Ans:

Q.No.68 All persons intending to hire Safe Deposit lockers are

required to open either a Current or Savings Bank account if they do not already maintain such account. Why? Ans:

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 Opening of an account would establish the credentials of the customer beyond doubt. Safe deposit locker rent can be debited to such accounts as and when due.

Q.No.69

CRR/SLR is revised periodically by RBI.

This is done as a measure of credit control. To control the liquidity in the banking system. To check inflationary/deflationary trends in the economy.
Q.No.70 Noting and Protesting is necessary in case of Usance

Bills and not for cheques and drafts. Ans: In case of usance bills, dishonour is not supported by any documents. Whereas in case of cheques and drafts, reasons for dishonour are given by the bank itself in writing. To establish evidence of dishonour, noting and protesting is necessary.
Q.No.71 In respect of Safe Deposit Lockers, the locks of

surrendered lockers must be inter changed before reallotment. Ans: In case of any lapse in control of master key, the same locker can be opened by the duplicate key by an unauthorised person. To ensure against any fraudulent use, the locks must be interchanged.
Q.No.72

While extending agricultural finance, obtention of no due certificates may be waived for new applicants seeking agricultural credit limits upto Rs.50,000/-.

Ans: To ease the workload at the branches. To quicken the disbursal of Agricultural Loans. As recommended by Gupta Committee.
Q.No.73 Safe deposit packets should be securely packed so

that the contents inside do not move. Ans: It prevents damage or loss to the contents of the packet at the time of redelivery. 16

 To safeguard the property as a bailee.

Q.No.74 Drafts are not issued as payable to bearer.

Ans: It would then amount to equal to currency, the issue of which is the monopoly of RBI, Prohibited by Sec.31 of RBI Act and Sec.4 of NI Act.
Q.No.75 Currency notes with political slogans should not be

accepted. Ans: As per provisions of "Legal Tender (inscribed notes) Act of 1964", such notes cease to be a legal tender. .
Q.No.76 When a LIC policy is reassigned after repayment of

Banks advance, the policy holder is advised to renominate. Ans: Every assignment cancels the earlier nomination. They will not be valid even after the policy is reassigned on liquidation of loan. Hence a fresh nomination is suggested.
Q.No.77 The Bank does not grant advances against partly paid

shares. Ans: If the shares stand transferred in the Bank's name, the Bank shall be forced to pay the calls in arrears. If the shareholder fails to pay calls in arrears, the shares may be forfeited by the company. This may entail loss of security.
Q.No.78 Articles in Safe Deposit and gold ornaments are not

deliverable against succession certificate. Ans: Succession certificate covers only debts and securities as per Sec.370 (2) of the Indian Succession Act. Safe deposit articles represent assets which are not covered under the Act. 17

Q.No.79 Before a duplicate draft is issued to the purchaser, a

written confirmation should be obtained from him stating that the original has not been delivered to the payee. Ans: On issue of a draft, a privity of contract is established between the Bank and the payee. Banker will get protection only if he obtains a letter of concurrence from the payee.
Q.No.80 We normally do not grant loans against gold

Ans: The ornaments may not belong to the borrower. To obviate any loss in case the title to those ornaments is proved defective.
Q.No.81 Banks lend actively under Self Help Groups.

ornaments which bear initials other than those of the borrower.

Ans: This creates self-employment to the rural people leading to rural development. More women are forming SHGs and by linking groups, women empowerment is achieved. Repayment level is very high in respect of these advances and the chances of the accounts becoming is NPA is very low.
Q.No.82 The duplicate keys of a branch are deposited with

another branch. Ans: To ensure separate custody of the two sets of keys. To facilitate easy operation in the event of loss of the original keys.
Q.No.83 A cheque payable to a firm may not be accepted for

credit to the private account of a partner without consent of the other partners. Why? Ans:

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 The failure to query the circumstances under which the amount of principal is credited to the account of an agent amounts to negligence. The Banker would held liable for "Conversion" under Sec.131 of NI Act.
Q.No.84 Before granting an advance against LIC policy the last

premium receipt should be produced and the surrender value to be ascertained. Ans: It is necessary to ensure that the policy is in force. To arrive at the limit to be sanctioned to the borrower
Q.No.85 Complaint forms to be provided to the customers in

triplicate. Ans: As per Goiporia committee recommendations, one copy as acknowledgement to the customer, one copy for the branch and one copy to the controlling authority with Branch Manager's remarks. This enables speedy disposal of the customer complaints. The system offers scope for more transparency.
Q.No.86 Capital Adequacy norms against risk weighted assets

have been introduced.

Ans:

To comply with international standards. As recommended by Basel Committee. To control credit expansion since increased credit need to be supported by an increase in capital and reserves too.
Q.No.87 Form 60/61 has to be obtained in the absence of a

PAN No., for opening account with an initial deposit of cash.

Ans:

CBDT have clarified that it is not mandatory to have a PAN / GIR No. to open an account. But, in lieu of that, form 60/61 has to be obtained. Form 61 relates to accountholders whose income is from agriculture and Form 60 is taken from others.

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Q.No.88

Branches have to affix hologram stickers on High value bank drafts (Rs 1 lac and above) and also on all bank LCs and Guarantees. To protect and preserve their authenticity. To prevent frauds by way of substitution and duplication.

Ans:

Q.No.89 All eligible account holders have to be canvassed for

ATM cards.
Ans:

To improve customer service by giving them any time money facility. To reduce workload at the counters. To make effective use of the large investment made in this alternate delivery/self service channel.
Q.No.90
Ans:

Branches are subjected to inspection and audit at irregular intervals.

To ensure that the branches are adhering to the laid down systems and procedures To check income leakage, control expenditure and To suggest remedial measures for growth and development.
Q.No.91 Daily vouchers at the branch should be scrutinised

with care and intelligence.

Ans:

It helps BM to know the inflow and outflow of funds so that plans for business development can be drawn. To detect any errors/mistakes. To detect frauds. To avoid fraudulent alteration of instruments.
Q.No.92 The Bank does not accept as security the LIC policy

taken out for the benefit of wife/child/children.

Ans:

Any insurance policy issued for the benefit of wife and children does not form part of the estate of the assured (As per Sec.6 of Married Women's Property Act). It represents trust money which is not assignable.
Q.No.93 Value dating has been extended on collections for

credit of advances accounts.

Ans:

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 To extend the facility of payment of interest on delayed collection to borrowers also. To develop awareness among operating staff regarding the importance of handling the bills/cheques received for collection/realisation.

Q.No.94 Formalities for payment of assets of deceased

constituents without legal representation have been relaxed by the Bank.

Ans:

To expedite processing of claims at the branch level in respect of accounts of deceased constituents. To reduce expenditure and hardship caused to legal heirs / claimants. As per directives of RBI/GOI/Customer Service Committee recommendations.
Q.No.95 We insist on insurance policy to be issued in the joint

names of the borrower and the bank in case of advances against goods.
Ans:

To obviate the possibility of the borrower claiming the insurance without the knowledge of the Bank. To avoid the complex procedure of taking policy in borrower's name and assigning it to the bank.
Q.No.96 Customer Relations Programmes are being arranged

at periodical intervals in the Bank.

Ans:

To have an opportunity to redress/arrange for redressal of the customer grievances. To develop rapport with the customers. To enhance customer satisfaction.
Q.No.97 Management Audit is conducted in the Bank.
Ans:

To evaluate the performance of the various management processes and functions in achieving the objectives of our Bank.
Q.No.98 All DP Notes executed by the borrowers are required

to be renewed after 2 to 2 1/2 years.

Ans:

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 To avoid the operation of law of limitation. If the debt becomes time barred, the Bank will lose the right of legal remedy.
Q.No.99 The Bank is now paying a great deal of attention to

marketing of its services.

Ans:

Due to great increase in competition. To overcome the effect of disintermediation. To increase profitability. Q.No.100 Covers containing letters to borrowers returned undelivered to the Branch must be retained unopened.
Ans:

This serves as constructive evidence of the dispatch of the letter. To safeguard the Bank's interest in the eyes of law in the event of contention by the borrower in future.
Q.No.101 Security Registers and Ledgers are maintained

separately for our deposits and other securities / scrips.

Ans:

To make a distinction between our time deposits and others. To ensure collection of periodical interest on the other securities and credit them to the loan account.
Q.No.102 Authority for sanction of concession in service

charges has been introduced.

Ans:

To maintain our competitive edge. To prevent business getting diverted to other Banks. To accelerate the decision making process. To impart greater flexibility in extending concessions in the competitive environment. Secrecy Bonds.

Q.No.103 All employees of the Bank execute Fidelity and

Ans:

Maintaining secrecy is a contractual obligation for Banker. By obtaining the Bonds, the employees are made party to this obligation.
Q.No.104 Frauds Register has to be maintained
Ans:

To enable the Branch Manager to follow up the various matters systematically and to enable inspecting officials to verify whether procedural inadequacies which had resulted in frauds have been rectified. 22

 To follow the Reserve Bank of India directives.

Q.No.105 Two signatures are taken on the Demand Promissory

Note, one over the Revenue Stamp and the other beside it.
Ans:

In case of loss of the Revenue Stamp, the other signature will provide as good evidence. It enables verification of the Borrower's signature.
Q.No.106 In case of death of a partner, it is advisable to stop

operations in the account of the firm and open fresh account for further operations. The death of a partner leads to dissolution of the firm (if not provided otherwise) as per Partnership Act, The Bank cannot make the legal heirs of the deceased partner for the debits subsequently raised in the account. To fix the partner's individual liability and avoid operation of the rule in "Clayton's Case".
Q.No.107 A stamped receipt is obtained from the legal

claimants, in addition to signatures on the Bankers cheque.

Ans:

The Receipt serves as a direct evidence of payment. This discharges the Bank from its fiduciary responsibility to the legal heirs.
Q.No.108 Partial Endorsement is not valid for purpose of

Negotiation.
Ans:

As per Sec. 56 of NI Act, a person's liability in a contract cannot be apportioned. Therefore, a partial endorsement will not be valid in law. Q.No.109 "Not Negotiable" crossing does not mean "Not Transferable".
Ans:

As per NI Act, a Not Negotiable crossing does not restrict the transferability of any instrument. But the holder does not get a better title than the transferor. Q.No.110 In case Attachment Orders are received in respect of an Account, the Bank insists on closure of accounts.
Ans:

The Revenue Attachment Orders attaches Future Credits also to the account.

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 The Bank will be liable to remit all future credits also to the Revenue Authorities till final satisfaction. To absolve the Bank from such future credits, the account is closed.

Q.No.111 TDRs maturing on holidays are repaid on succeeding

working day but not on preceding working day. Ans: Bank holidays are declared as per section 25 of NI Act with specific reference to payment of negotiable instruments which are paid on the previous working day. TDRs are not negotiable instruments but are receipts of money deposited. Their payments cannot be made before maturity as per contract.
Q.No.112 Note bundles should be periodically turned over in

the strong room.

Ans:

To avoid notes getting stuck to each other/deteriorate in quality. To obviate notes getting damaged due to white ants/pests To enable verification at periodical intervals.
Q.No.113 Cash Receipt / Delivery Book are to be maintained by

each of cash dept. staff (excepting subordinate staff).

Ans:

To record acknowledgement of receipt and delivery of cash To fix responsibility of cash received / handed over To facilitate balancing of cash at the end of the day.
Q.No.114 A system of intra-day cash verification at the cash

counters by the Cash Officer at irregular intervals has been introduced.

Ans:

To reduce incidence of frauds committed at cash counters by employees with fraudulent bent of mind. As a preventive vigilance measure. Q.No.115 Gestation period is given in respect of term loans. Ans:

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 A certain period is required for the completion of the project/income generation to repay the dues Hence the time lag known as gestation period is given. Personal Accident Insurance Scheme for KCC Holders has been introduced.
Q.No.116

Ans: To provide risk coverage to the KCC holders. Government of India/RBI guidelines.

Q.No.117 Agriculture finance is a supervised credit.

Ans: It has to be closely followed up for the end use for the mutual benefit of borrower and banker The approach should be farmer oriented rather than farm oriented.
Q.No.118 Inspection of agricultural advances should be farmer

oriented rather than farm oriented. Ans: To understand their problems, credit requirements and repayment capacity. To ensure better supervision; follow up, recovery and revival.
Q.No.119 Loans for cultivation of horticulture and plantation

crops are given as term loans. Ans: Loans to horticulture/plantation are spread over more than three year period. The gestation period for the plantation crops is very long.
Q.No.120 Bank encourages Kisan Credit Cards.

Ans: To facilitate adequate and timely flow of credit to farmers. To provide flexibility to the borrowers. To control costs effectively.

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