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A DETAILED STUDY
BANKING SYSTEM IN
INDIA
Banking system occupies an important
place in a nations economy. A banking
institution is indispensable in a modern society.
It plays a pivotal role in the economic
development of a country and forms the core of
the money market in an advanced country.
For the past three decades Indias
banking system has several outstanding
achievements to its credit. The most striking is
its extensive reach. It is no longer confined to
only metropolitans or cosmopolitans in India. In
fact, Indian banking system has reached even to
the remote corners of the country. This is one of
the main reasons of Indias growth process.
The governments regular policy for
Indian bank since 1969 has paid rich dividends
with the nationalization of 14 major private
banks of India.
Not long ago, an account holder had to
wait for hours at the bank counters for getting a
draft or for withdrawing his own money. Today,
he has a choice. Gone are days when the most
efficient bank transferred money from one
branch to other in two days. Now it is as simple
as instant messaging or dial a pizza. Money has
become the order of the day.
The first bank in India, though
conservative, was established in 1786. From
1786 till today, the journey of Indian Banking
System. Can be segregated into three distinct
phases. They are as mentioned below:
2
Authorised Capital
Paid-up Capital
(Rs.Lakhs)
(Rs.Lakhs)
12
274
35
1914
42
710
109
1915
11
56
1916
13
231
1917
76
25
1918
209
Years
1913
OF
BANKS
OR
3
scale specially in rural and semi-urban areas. It
formed State Bank of India to act as the
principal agent of RBI and to handle banking
transactions of the Union and State
Governments all over the country.
Despite the provisions, control and
regulations of Reserve Bank of India, banks in
India except the State Bank of India or SBI,
continued to be owned and operated by private
persons. By the 1960s, the Indian banking
industry had become an important tool to
facilitate the development of the Indian
economy. At the same time,. It had emerged as a
large employer, and a debate had ensued about
the nationalization of the banking industry.
Indira Gandhi., then Prime Minister of India,
expressed the intention of the Government of
India in the annual conference of the All India
Congress Meeting in a paper entitled Stray
thoughts on Bank Nationalisation. The meeting
received the paper with enthusiasm.
Thereafter, her move was swift and
sudden. The Government of India issued an
ordinance and nationalized the 14 largest
commercial banks with effect from the midnight
of July 19, 1969. Jayaprakash Narayan, national
leader cal sagacity. Within two weeks of the
issue of the ordinance, the Parliament passed the
Banking Companies (Acquisition and Transfer
of Undertaking) Bill, and it received the
presidential approval on 9 August 1969.
A second dose of nationalization of 6
more commercial banks followed in 1980. The
stated reason for the nationalization was to give
the government more control of credit delivery.
With the second dose of nationalization, the
Government of India controlled around 91% of
the banking business of India, Later on, in the
year 1993, the government merged new Bank of
India with Punjab National Bank. It was the only
merger between nationalized banks and resulted
in the reduction of the number of nationalized
1959:
Nationalisation
subsidiaries.
of
SBI
SECTOR
4
its reforms measure. In 1991, under the
chairmanship of M Narasimham, a committee
was set up by his name which worked for the
liberalization of banking practices. In the early
1990s, the then Narsimha Rao government
embarked on a policy of liberalization, licensing
a small number of private banks. These came to
be known as New Generation tech/savvy banks,
and included Global Trust Bank (the first of such
new generation banks to be set up), which later
amalgamated with Oriental Bank of Commerce
Axis Bank (earlier as UTI Bank), ICICI Bank
and HDFC Bank. This move, along with the
rapid growth in which has seen rapid growth
with strong contribution from all the three
sectors of banks, namely government banks
private banks and foreign banks.
The next stage for the Indian banking
has been set up with the proposed relaxation in
the norms for Foreign Direct Investment, where
all Foreign Investors in banks may be given
voting rights which could exceed the present cap
of 10%, at present it has gone up to 74% with
some restrictions.
The new policy shook the Banking
sector in India completely. Bankers, till this
time, were used to the 4-6-4 method (Borrow at
4%; Lend at 6%; Go home at 4) of functioning.
The new wave ushered in a modern outlook and
tech-savvy methods of working for traditional
banks. All this led to the retail boom in India.
People not just demanded more from their banks
but also received more.
Currently (2007), banking in India is
generally fairly mature in terms of supply.
Product range and reach-even though reach in
rural India still remains a challenge for the
private sector and foreign banks. In terms of
quality of assets and capital adequacy, Indian
banks are considered to have clean, strong and
transparent balance sheets relative to other banks
in comparable economies in its region. The
5
The nationalization of banks in India
took place in 1969 by Mrs. Indira Gandhi, the
then Prime Minister. It nationalized 14 banks
Bank of Maharashtra
Bank of Baroda
Dena Bank
Union Bank
Allahabad Bank
Syndicate Bank
Canara Bank
UCO Bank
Indian Bank
Bank of India
SCHEDULED COMMERCIAL
BANKS IN INDIA
6
section 3 of the Banking Companies)
Acquisition and Transfer of Undertakings) Act,
1970 (5 of 1970), or under section 3 of the
Banking Companies (Acquisition and Transfer
of Undertaking) Act, 1980 (40 of 1980), or any
other bank being a bank included in the Second
Schedule to the Reserve Bank of India Act, 1934
The following are the Scheduled Banks in
India (Public Sector):
Corporation Bank
Dena Bank
Indian Bank
Andhra Bank
Allahabad Bank
Syndicate Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
UCO Bank
Canara Bank
Vijaya Bank
Hongkong and
Corporation
Shanghai
Banking
8
conveys that foreign banks in India may not
acquire Indian ones (except for weak banks
identified by the RBI, on its terms) and their
Indian subsidiaries will not be able to open
branches freely.
ABN-AMRO Bank
Deutsche Bank
HSBC
Bank of Ceylon
Citi Bank
Scotia Bank
Taib Bank
Switzerlands UBS
US-based GE Capital
THE FIRST, THE OLDEST, THE LARGEST AND THE BIGGEST BANK IN INDIA
The first bank in India to be given an ISO Certification
Canara Bank
The first bank in Northern India to get ISO 9002 certification for their
selected branches
The first Indian bank to have been started solely with Indian capital
The first among the private sector banks in Kerala to become a scheduled
bank in 1946 under the RBI Act.
Indias oldest, largest and most successful commercial bank, offering the
widest possible range of domestic, international and NRI products and
services, through its vast network in India and overseas
Indias second largest private sector bank and is now the largest scheduled
commercial bank in India
The first Indian bank to open a branch outside India in London in 1946
and the first to open a branch in continental Europe at Paris in 1974
The oldest Public Sector bank in India having branches all over India and
serving the customers for the last 132 years
Allahabad Bank
The first Indian commercial bank which was wholly owned and managed
by Indians
Banks
Tag Line
Allahabad Bank
A tradition of trust
Andhra Bank
Bank of Baroda
Bank of India
Bank of Maharashtra
Canara Bank
Its easy to change for those who you, Love together we can do
Central Bank
Dena Bank
10
Indian Bank
Syndicate Bank
UCO Bank
Vijaya Bank
Dare to dream
Federal Bank
J & K Bank
Serving to empower
Karnataka Bank
Nainital Bank
ICICI Bank
Hum Hai Na
Yes Bank
INTERNATIONAL BANKS
HSBC
Citibank
BNP Parisbas
11
Lloyds TBS
Nationalization : 1959
ANDHARA BANK
12
Estd . in Year : 1923
Share Capital
Government )
Founder : P. Sitaramaiya
62.50
per
cent
(Central
per
cent
(Central
CANARA BANK
Old Name : Canara Bank Hindu Permanent Fund
Estd. in Year : 1906
BANK OF BARODA
Share Capital
Government)
66.81
: 73.17 per
cent
per
cent
(Central
BANK OF INDIA
CORPORATION BANK
(Central
76.77
Share Capital
Government)
69.47
per
cent
57.17
per
cent
(Central
13
Estd. in Year : 1938
Share Capital
Government)
51.10
per
cent
(Central
INDIAN BANK
Share Capital
Government)
57.79
per
cent
SYNDICATE BANK
Share Capital
Government)
73.52
per
cent
UCO BANK
:66.5
(Central
Share
Capital
Government)
(Central
percent
(Central
Share Capital:
Gorvernment)
74.98
percent
(Central
14
UNION BANK OF INDIA
Functions of a Bank
60.85
per
cent
(Central
c. Agency Services
d. General Services
VIJAYA BANK
53.87
per
cent
(Central
COMMERCIAL BANKS
Meaning of Banks: Banks are the institutions that
mobilise the savings of the community and
make
them available to the entrepreneurs.
They acts as a bridge between the users of
capital and those who save but cant use the
funds themselves.
15
E. Speculative activities
F. Neglect of priority sectors.
Progress of Commercial Banks.
A. Expansion of Branches: Mostly all the banks
has opened their branches in whole country.
B. Branches in Rural Area: Number of rural
branches was rose to 42% in 2005 as compare
to 22% in 1969.
C. Deposit mobilization: Maharashtra leads all
other states and accounts for more than 1/5 th of
the aggregate deposits.
D. Bank Lending: In 1969 agriculture, small
scale industries and small retail trade accounted
for about 14% of the commercial bank credit
but now in May 2004 it rises to 40%.
Shortcomings of Commercial Banks
A. In rural areas 75% of the population resides
but they had only 50% of the bank branches.
B. There are regional imbalances.
C. Almost 50% of the loans and advances of
the banks have not been recovered.
D. Quality of services had been deteriorated.
A. Commercial Banks refer to both scheduled
and non-scheduled commercial banks which are
regulated under Banking Registration Act. 1949.
a) Scheduled Commercial Banks are grouped
under following categories;
1. State Bank of India nad its Associates
2. Nationalised Banks
3. Foreign Banks
4. Regional Rural Banks
5. Other Scheduled Commercial Banks
banking
&
foreign
16
2. Semi-urban group includes banked
centres with population of 10,000 and above
but less than 1 lakh.
3. Urban group includes banked centres with
population of 1 lakh and above but less than
10 lakh.
4. Metropolitan group includes banked
centres with population of 10 lakh and
above.
J. Distrct-wise list
District-wise list of branches/ offices are based
on latest available information on districts, inclusive
of details available on formation/ re-organisation of
H. Type
of
Business
activity
wise
Designatory Code of Branches / Offices of
banks
Code
Description
districts.
MONETARY POLICY
Monetary policy means the policy of the central
exchange rates.
Description
17
of economic growth 6) Encourages saving and
capital formation
reserves.
follows.
iii. Change in reserve requirements: The two
1) Underdeveloped capital and money Market
2) No integrated rate of interest structure
5) Banking habits
6) Existence of black money.
7) Government policies.
Monetary policy is implemented by the RBI
through the instruments of credit control. Generally
ii.
18
the securities. Thus, by changing the margin rate the
Central Bank controls credit.
iii. Credit rationing: It means that the central
bank fixes a limit upon its rediscounting facilities for
any bank. It also means that Central Bank fixes the
quota of every affiliated bank for financial
accommodation from the central bank.
iv. Regulation of consumer credit: This
method proves useful when economy faces the
problem of inflation. Under this method the Central
Bank curtails or extends the limit to which
commercial banks can provide credit/ finance
facility to the consumers or durable goods.
v. Publicity: Under this method the Central
2) Japan
3) Italy
OBJECTIVE QUESTIONS ON
BANKING INDUSTRY
1. The Business Correspondence Model being
adopted by the banks provides Banking
facilities to which of the following
4) China
5) Germany
4. Which
of
the
following
agencies/
organizations has decided to make major
changes for ULIPs?
1) IRDA
2) RBI
3) AMFI
4) FRBI
19
5) None of these
5. Which of the following is NOT a financial
term?
1) Ac:d Test
2) Double Fault
3) Gross Profit
4) Depreciation
5) Cash flow
6. In the terms of economics, the recession
occurring two times with a small gap in
between is known as_
1) Double Deflation
2) Deflation
3) Deep Recession
4) Double Dip Recession
5) None of these
7. A consortium of commercial banks has joined
hands to float a new company which will
collect data related to frauds and security risks.
Which of the following is the name of the
company?
20
1) Only (B)
2) Only (A)
3) Both (A) and (B)
A) Monetary Measure
C) Regulatory Measure
1) Only (A)
2) Only (B)
3) All (A), (B) and (C)
4) Both (A), and (C)
5) Only (C)
14. Basel Committee on Banking Supervision is
also/or popularly known as__
1) Thomas Cook Committee
2) Talwar Committee
3) Bank
for
committee
Settlements
B)
C)
International
1) Only (A)
21
2) Only (B)
3) Only (C)
2) April 2012
3) January 2011
2) Safe Window
transaction
4) January 2012
In
Institution
case
of
for
financial
5) None of these
17. Government may reduce its budgetary deficit
by various measures. Which of the following is
NOT one such measure?
1) Market borrowing
2) Deficit financing
3) Foreign grants
4) Increasing taxes
1) Future contract
2) Forward contract
3) Market contract
1) a company to a bank
4) Standard contract
2) Banks to Companies
5) None of these
3) Banks to Banks
5) None of these
19. MAT provision
for_____
5) None of these
in
income
Tax
stands
2) Ministry of Commerce
3) FEDAI
22
4) Ministry of Finance
5) None of these
23. Lending to Self Help Groups (SHGs) by Banks
is known as_
1) Non priority Sector
2) Priority sector
5)
None of these
3) Commercial sector
a) GDP
4) Corporate Sector
b) PPP
5) None of these
c) FDI in a year
1) Only (A)
3) Only (C)
2) Only (B)
1) only (A)
1) hardly useful
2) Only (B)
5) Only (C)
25. While tackling the problem of inflation. Which
one of the following aspects is taken into
consideration by the RBI?
1)
2)
5) a very
inflation
important
segment
regulate
23
1) Only (A)
2) only (B)
3) Only (B) and (C)
4) Only (A) and (B)
5) All (A), (B) and (C)
29. As per the reports published in various
newspapers, the Reserve bank of India has
directed all core investment companies in India
to register themselves with it if their asset size
is ` 100 crore or more. Which of the following
is true about the Core investment companies
(CICs)?
A) CICs are non-banking finance companies.
B) CICs invest in shares for the purpose of
taking stake in a company rather than for
trading.
C) CICs are required to register with RBI as
most of them were found involved in
business in foreign countries and not in
India.
1) Only (A)
5) None of these
31. Which of the following terms is NOT used in
the field of banking and finance?
1) Blue chip companies
2) Commercial paper
3) Hedge
4) Premium Bonds
5) Wobbe Index
32. Which one of the following advice has been
given by the Finance Minister of India to
Banks, while addressing the 5 th International
Banking and Finance Conference?
1)
2)
3)
4)
5)
None of these
1) 10%
4) International
Standards
2) 5%
5) None of these
3) 3%
4) 1%
Financial
Reporting
24
1) It is a mechanism to protect firms exposure
to equity risk
1) RBI Act
5) None of these
36. A lease
1) is a rental agreement between owner of a
flat/house and the Tenant, whereby the
Tenant pays specified amount on specified
dates to the owner.
2) is a legal contract-between the owner of an
asset and its user, containing many
conditions including payment of a specified
amount by the user to the Owner for use of
the asset.
3) is mainly used for machinery.
5) None of these
5) None of these
37. Factoring____
25
1) Education Loans
2) commercial Loans
1) It leads to inflation
5) Home Loans
1) LIC
2) GIC
5) None of these
3) SIDBI
4) NABARD
5) None of these
43. As per recent newspaper reports, Indias public
debt rises 2.8 percent to ` 28 lakh crores.
Which one of the following is the reason that
has forced commercial banks to buy
government securities?
1) Lack of credit growth
1) Is always constant
5) None of these
26
5) None of these
48. A saving Bank Deposit Account is one
where_____
1) Amounts are deposited and are withdrawn as
per requirement of the customers.
2) The deposits are made only once in a year
3) Ministry of Finance
4) SEBI
5) IRDA
52. The regulator of the banking system in India is
__
1) AMFI
2) Finance Minister
4) IBA
5) None of these
5) RBI
3) SEBI
1) Gold
2) Silver
5) None of these
5) Prime Minister
1) Salaried class
1) Assignment
2) businessmen
2) Pledge
3) foreign customers
3) Transfer
4) children
4) Mortgage
5) Senior citizens
5) None of these
27
3) is used to calculate the number of excellent
audit rated branches.
1) 60 days
2) 12 days
3) 30 days
4) 45 days
1) Liquidity risk
5) None of these
2) Currency risk
3) Credit risk
4) Transaction risk
5) None of these
2) IDBI Bank
3) ICICI Bank
4) HDFC Bank
5) None of these
5) None of these
62. An IPO is ____
1) initial price offered by a private limited
company to its shareholders
2) an offer by an unlisted company for sale of
its shares for the first time to the public
3) used to increase the share capital of an
unlisted company
4) a book building process
5) None of these
28
63. A decreasing current ratio indicates__
1) a stable liquidity
2) an increasing liquidity
3) a strained liquidity
5) None of these
1) Only (A)
2) Only (B)
5) None of these
67. The Reserve Bank does not have an office in__
1) Kanpur
2) Jaipur
3) Lucknow
4) Bhopal
5) Gulbarga
68. Which one of the following is the objective of
Corporate Social Responsibility (CSR) issued
by the Government?
1) To ensure that Companies take steps for
rehabilitation of project affected people
2) To ensure that Companies use some of their
profits for educating the project affected
people
3) To ensure that Companies provide health
care to project affected people
4) To ensure that Companies take preventive
measures to avoid environmental damage
29
5) None of these
69. Which one of the following have provided
bailout package to Ireland to deal with its debt
crisis?
1) EU only
2) IMF only
3) World Bank Only
4) Only (1) and (2) above
5) All (1), (2) and (3) above
70. Which one of the following has launched
guidebook on standards for exporters?
1) RBI
2) SEBI
3) IBA
4) UNIDO
5) UNESCO
71. Which of the following banks has taken over
the Centurion Bank of Punjab?
1) ICICI bank
2) IDBI Bank
3) HDFC Bank
4) AXIS Bank
5) None of these
72. Which of the following nation is considered the
originator of the concept of Micro Finance?
1) India
2) Bangladesh
3) South Africa
4) USA
5) None of these
73. What is the full form of ULIP, the term which
was in the news recently?
1) Universal Life & Investment Plan
2) Unit Loan & Insurance Plan
3) Universal Loan & Investment Plan
4) Uniformly Loaded Investment Plan
5) Unit Linked Insurance Plan
74. The Main function of I. M. F. is to
1) Finance investment loans to developing
countries
2) Act as a private sector lending arm of the
world Bank
3) Help to solve balance of payment problems
of member countries
4) Arrange international deposits
5) None of these
75. RBI has asked banks to make a plan to provide
banking services to all villages having a
population upto 2000. This directive issued by
the RBI will fall in which of the following
categories?
1) Plan for Financial Inclusion
2) Efforts to meet the targets of Priority Sector
Lending
3) Extension of Relief Packages to the Farmers
4) Plan for opening more rural branches
5) None of these
76. Which of the following is not a part of the
scheduled banking structure in India?
30
1) Money Lenders
2) Public sector banks
1) April 2011
2) October 2011
3) April 2012
4) October 2012
5) None of these
81. At which one of the following rate, the central
bank lends to banks against government
securities?
4) Government of India
1) Repo Rate
3) Bank Rate
4) SLR
5) CRR
82. As per the reports published in the newspapers
the banks, particularly public sector banks are
tying up with various rating agencies for
providing a qualitative assessment of the credit
needs of the borrowers. Which amongst the
following is/ are such credit rating agencies in
India?
A) CARE
B) CRISIL
C) ULIP
1) Only A
2) Only B
3) A and B only
4) Only C
5) All A, B and C
31
83. As per the newspaper reports the RBI is
planning to introduce plastic Currency
Notes. What is/ are the benefits of Plastic
Notes ?
A) Their Shelf life will be longer.
B) It will replace plastic money or credit, debit
cards which are giving birth to many
fraudulent practices.
C) Printing will be cheaper.
1) Only C
2) Only B
3) Only A
4) All A, B and C
5) None of these
84. Sub Prime Lending is a term applied to the
loans made to_
1) those borrowers who do not have a good
credit history.
2) those who wish to take loan against the
mortgage of tangible assets.
3) those who have a good credit history and are
known to bank since 10 years.
4) those borrowers who are most preferred
customers of the Bank.
5) None of these
85. As per the reports published in various journals
and newspapers the small borrowers in rural
areas still prefer to take informal route for their
credit needs. Which of the following is the
informal route of credit in financial sector?
1) Credit cards
2) Loan against gold from financial institute
3) Debit cards
4) Money lender
5) None of these
86. Basel-II norms are associated with which of the
following aspects of the banking industry?
1) Risk management
2) Manpower planning
3) Retirement benefits for the employees
4) Corporate Governance
5) None of these
87. What is meant by Underwriting the term
frequently used in financial sector?
1) Under valuation of the assets
2) The Act of taking on a risk for a fee
3) Giving a Guarantee that a loan will not
become a bad loan
4) The act of permission to float an IPO
5) None of these
88. As we have noticed many banks of Indian origin
are opening offices/branches in foreign
countries. Why is this trend emerging at a very
fast pace?
A) These banks wish to provide banking
facilities to foreigners as banking facilities
are not plenty in many foreign countries.
India wants to take an advantage of the
situation.
B) These banks wish to help Indian firms, to
acquire funds at internationally competitive rates.
C) These banks wish to promote trade and
investment between India and other countries.
32
1) Only A
2) Only B
3) Only C
4) All A, B and C
5) None of these
5) Only B and C
89. Which of the following
banking/finance related term?
NOT
1) Credit wrap
2) EMI
3) Held to Maturity
5) None of these
4) Exposure limit
5) Diffusion
5) None of these
2) Only B
Which
one
of
the
following
organisations/agencies are involved in drafting
the Union Budget of India?
3) Only C
4) Both A and B
5) None of these
94.
33
95.
1) RTGS
2) ASBA
3) Prefunded Cheques
2) National Foundation
Governance (NFCG)
5) None of these
for
Corporate
4) SCSBs
1) Bangladesh
2) Only (B)
2) India
3) China
4) Japan
5) None of these
5) None of these
97. Which of the following is introduced by banks to
increase financial inclusion?
1) Stimulus package
2) Internet Banking
3) Business correspondent
4) Corporate Banking
5) None of these
98. Which of the following is a type of banking
application which authorizes a bank to black a
specific sum of money in an individuals bank
account to be invested in an Initial Public Offer
(IPO) ?
34
2) Off-shore banking
3) Investments in secondary market
4) Wealth management
5) None of these
102. Who amongst the following has asked banks to
adopt six step approach to prevent diversion of
funds by the companies ?
1) Company Registrar
2) SEBI
3) RBI
of
international
accounting
4) AMFI
4) Transparency In disclosures
5) None of these
106. Which one of the following will set up core
banking infrastructure for rural banks ?
B) FPO only
1) RBI
C) Commercial papers
2) NABARD
1) Only (C)
3) SIDBI
4) IBA
5) None of these
4) Only (A)
5) Only (A) and (B)
104. Which one of the following was the reason
owing to which government wants Reserve
Bank of India to tighten prudential norms for
NBFCs ?
1) To reduce liquidity in the market
2) II is as per Basel II requirements
35
A) Violation of Banking Regulation Act.
B) Violation of foreign portfolio investment
guidelines.
1) Only (A)
5) None of these
5) None of these
C) Inflation only.
1) Only (A)
2) Only (B)
3) Only (A) and (B)
4) Only (C)
5) All (A), (B) and (C)
36
5) None of these
115. One single statement that depicts the financial
position of a bank and/or business enterprise at
a given point of time is called_____
1) Statement of product details
2) Reconciliation statement
4) Mutual
5) Ministry
119. One of the major challenges banking industry is
facing these days is deliberate efforts of some
people to bring money earned through illegal
activities in circulation. Which of the following
acts is passed to prevent this activity ?
3) Balance Sheet
3) SLR
1) Exim Bank
4) CRR
5) Savings Rate
37
2) Internal Revaluation Reserve
3) Investment Reserve Ratio
4) Internal Risk Return
5) None of the above
123. Which of the following organizations provides
credit history of the borrowers?
5) None of these
126. Banking and financial services, all over the
world, are regulated usually by monetary
Authority of the land. Who controls this
function in India?
1) Ministry of Finance
2) SEBI
1) CIBIL
3) RBI
2) ARCIL
4) IRDA
3) SEBI
5) FEDAI
4) RBI
5) CCIL
124. Banks need liquidity to meet which of the
following objectives of banking?
A) Meet deposit withdrawal
B) Fund loan demands
C) Maintain public confidence
1) Only (A)
2) Only (B)
3) Only (C)
4) Only (A) and (B)
5) Only (B) and (C)
125. Banks make frequent changes in their product
profile including introduction of new products
etc. This is called__
1) Product Control
2) Product enhancement
3) Product marketing
4) Product enrichment
Money
Market
4) Floating Income
Derivative Assets
Money
Markets
&
5) None of these
129. Which of the following terms is NOT used in
banking?
38
1) Debit Card
3) RBI
2) Credit Card
4) SBI
3) Kisan card
5) NABARD
4) ELISA-Test
5) None of these
130. Which of the following is/ are the objective(s)
of our monetary policy?
3) Orissa
4) Bihar
5) None of these
134. Which of the following terms is NOT used in
Economics?
2) Ad Valoram Tax
4) Only (B)
3) Break even
5) None of these
4) HIV Positive
39
B) Availability of cheap credits through
appropriately designed loans for poor and low
income households and small entrepreneurs
C) CRR/SLR
2) Only (B)
1) Only (A)
4) Only (C)
2) Only (B)
3) Only (C)
4) Both (A) and (B)
5) All (A), (B) and (C)
137. Which of the following terms is used in
Economics?
1) Only (A)
1) Keynesian
4) SLR
2) Adsorption
5) CRR
3) Affinity Matrix
4) Gene Flow
5) None of these
138. Which one of the following is the directive
given to the Govt. of India in the Financial
Stability Report submitted to it?
through
business
5) None of these
40
4) To facilitate better delivery of credit to
farmers through Panchayats
5) None of these
143. Which of the following terms is NOT used in
Banking World?
1) Holding Company
2) Post dated cheque
3) Credit
4) Time deposit
5) Centripetal force
3) Senior Citizen
4) Women who do not have in dependent
source of income
5) None of these
148. Many a times we read in the newspapers a term
HOT MONEY Which of the following is the
correct definition of HOT MONEY?
A) This is the fund which is dumped into a
country to get the advantage of a favourable
interest rate and hence brings higher returns.
B) This is the fund which is provided by a bank
in USS at very short notice and at a very
41
high rate of interest and for a longer period
of repayment.
C) This is the fund which is pushed into market
through Hawala or some other such illegal
methods and some times referred also as
Black Money.
1) Only (A) is correct
2) Both (A) and (B) are correct
3) Only (C) is correct
4) Both (A) and (C) are correct
5) Only (B) is correct
149. The real return to the investor sometimes gets
reduced due to sudden rise in the prices of the
commodities. This phenomenon in financial
market is known as correct
1) Only (A)
2) Only (B)
3) Only (C)
4) All (A) and (C)
5) None of these
151. The Sensitive Index of the Bombay Stock
exchange keeps on changing positively and
negatively both. Which of the following is/are
the main reasons which contribute for his
sudden change in the same?
A) Higher GDP Growth
B) Continuous Foreign Funds Flow
C) High Volume of Forex reserves
D) Recession in USA
1) Market risk
2) Inflation risk
3) Credit risk
4) Diversification of funds
4) Only (B)
5) None of these
42
3) A and B only
1) Credit cards
4) Only C
5) All A, B and C
3) Debit cards
4) Money lender
5) None of these
156. Base-II norms are associated with which of the
following aspects of the banking industry?
1) Risk management
2) Manpower planning
1) Only C
2) Only B
4) Corporate Governance
3) Only A
5) None of these
4) All A, B and C
5) None of these
154. Sub Prime Lending is term applied to the
loans made to
5) None of these
158. As we have noticed many banks of Indian
origin are opening offices/branches in foreign
countries. Why is this trend emerging at a very
fast pace?
A) These Banks wish to provide as banking
facilities to foreigners as banking facilities
are not plenty in many foreign countries.
India wants to take an advantage of the
situation.
B) These banks wish to help Indian firms to
acquire funds at internationally competitive rates.
43
C) These banks wish to promote trade and
investment between India and other countries.
1) Only A
40 Exposure limit
5) Diffusion
161. Which of the following is NOT one of the
recommendations of the committee setup on
Financial
sector
Reforms
under
the
Chairmanship of Raghuram G. Rajan.
2) Only B
3) Only C
4) All A, B and C
5) Only B and C
159. Many economists, bankers and researchers in
India often advocate that banks should equip
themselves for new challenges. These
challenges are in which of the following
shapes/ forms?
A) As Indian economy is getting increasingly
integrated with the rest of the world the
demand of the corporate banking is likely
to change in terms of size, composition of
services and also the quality.
B) The growing foreign trade in India will have
to finances by the local banks.
C) Foreigners are habitual of the comforts
provided by the technology, India has to do
a lot in this reference.
1) Only A is correct
2) Only B is correct
3) Only C is correct
2) Bank Rate
3) Repo Rate
5) None of these
is
NOT
44
2) a new type of ATM useful for rural
population.
1) Agricultural sector
2) Service sector
5) None of these
4) Industrial sector
3) Manufacturing
5) None of these
168. An account in which trading of shares in their
electronic form is done, is known as___
1) Demat Account
2) NRI Account
3) NRIO Account
4) Current Account
5) None of these
45
171. When more than one banks are allowing credit
facilities to one party in coordination with each
other under a formal arrangement the
arrangement is generally known as_______
1) Participation
2) Consortium
5) None of these
3) Syndication
4) Multiple banking
5) None of these
172. Open market operations, one of the measures
taken by RBI in order to control credit
expansion in to economy means______
3) Auction of gold
4) to make available direct finance to borrowers
5) None of these
5) None of these
174. What is an Indian depository Receipt?
1) A deposit account with a Public sector bank
2) A depository account
depositories in India
with
any
of
46
4) Money borrowed for more than one day but
up to 14 days
5) None of these
178. The branding line of Bank of Baroda is_____
1) International Bank of India
2) Indias International Bank
3) Indias Multinational bank
4) Worlds local Bank
5) None of these
179. The logo of Bank of Baroda is known as____
1) Sun of Bank of Baroda
2) Baroda Sun
3) bank of Barodas Rays
4) Sunlight of bank of Baroda
5) None of these
180. One of the major challenges banking industry is
facing these days is money laundering. Which
of the following , acts. Norms are launched by
the banks to prevent money laundering in
general?
1) know Your customer Norms
2) Banking regulation Act
3) Negotiable Instrument Act
4) Narcotics and Psychotropic Substance Act
5) None of these
181. Lot of Banks in India these days are offering
M-Banking Facility to their customers. What is
the full form of M in M-Banking?
1) Money
2) Marginal
3) Message
4) Mutual Fund
5) Mobile Phone
182. Which of the following is/are true about the
Sub-Prime Crisis? ( The term was very much
in news recently).
a) It is a mortgage crisis referring to Credit
default by the borrowers.
b) Sub-Prime borrowers were those borrowers
who were rated low and were high risk borrowers.
c) This crisis originated because of negligence
in credit rating of the borrowers.
1) Only A
2) Only B
3) Only C
4) All A, B and C
5) None of these
183. Which of the following is NOT the part of the
scheduled banking structure in India?
1) Money Lenders
2) Public Sector Banks
3) Private Sector Banks
4) Regional rural Banks
5) State Co-operative Banks
184. Very often we read in newspapers/magazines
about Sovereign Wealth Funds. Which of the
following is/are the correct description of the
same?
A) These are the funds or the reserves of a
government or central bank of a country
47
which are invested further to earn profitable
returns.
B)
2) Only (B)
3) Only (C)
4) Only (A)
5) None of these
185. The Ratio of the Cash reserves that the banks
are required to keep with RBI is known as_
1) Liquidity Ratio
2) SLR
3) CRR
4) Net Demand and Time Liability
5) None of these
186. Very often we read about the Monetary Policy
of the RBI in a newspapers/magazines. What
is/are the objectives of the Monetary Policy of
the RBI?
1) Only A
2). Only B
3) Only C
4) All A, B and C
5) None of these
188. The rate at which the RBI gives loans to the
commercial banks is called
1) Repo rate
2) Bank rate
4) CRR
3) Reverse Repo
5) None of these
48
189. Which of the following is NOT the part of the
organized sector of India Money Market?
1) Mutual Funds
2) Liquidity in economy
1) Only A
2) Only B
5) None of these
3) Only C
4) All, A, B and C
5) None of these
195. Which of the following is/are the major
concepts visible in todays banking industry in
India?
A) Risk Based Management
B) Growing competition
49
C) IT Initiatives
1) Only A
2) Only B
1) Preventive
3) Only C
2) Compliance
4) Both B and C
3) Corrective
5) All A, B and C
4) Detective
5) None of these
199. A customer wishes to purchase some US dollars
in India. He/She should go to_
1) Personal Loan
2) Corporate Loan
3) Educational Loan
4) Mortgage Loan
5) None of these
197. Which of the following is the limitation of the
ATMs owing to which people are required to
visit branches of the bank?
A) It does not accept deposits.
B) It has a limited cash disbursement capacity.
C) Lack of human interface.
1) Only A
2) Only B
3) Only C
4) All A, B and C
5) None of these are limitations
198. A Bank/ Financial Organization these days
relies heavily on e-commerce for its
transaction. As a part of system security, it has
introduced organizations security awareness
50
201. Banks and other institutions have issued debit
and credit cards the purpose of both are:
5) None of these
51
3) Multi State Co-operative Societies Act,2002
4) Banking Laws (Application to Co-operative
Societies) Act, 1965
5) None of these
208. Banking Regulation Act, 1949 deals with
1) The regulation of banking companies
2) The control over the management of banking
companies
3) Suspension and winding up of banking
companies
4) All of the above
5) None of these
209. Under what circumstances can the bank close a
partnership account?
1) Death of Partner
2) Retirement of a partner
3) Insolvency of a partner
4) All of the above
5) None of these
210. Power of attorney is a stamped document and
generally executed in the presence of
1) A Notary Public
2) A Magistrate of a Court
3) An Authorised Government official
4) All of the above
5) None of these
211. Can banks lend below their PLR? If so, to
which sectors?
52
4) All of the above
3) SBI
5) None of these
4) SIDBI
5) None of these
217. Disadvantages to Credit Card holders include:
1) Member card
2) Charge card
3) Credit card
3) Forged signatures
4) Smart card
5) None of these
5) None of these
2)
Bank
marketing
has
to
discover/ascertain/anticipate the financial
needs of the corporate.
3) Lien
5) None of these
53
2) Banker to Government
3) BankersBank
4) Banker to the general public
5) All are correct
221. The instruments used by RBI under general
credit control are:
1) Bank Rate
2) CRR
3) SLR
1) 25
4) Exchange Control
2) 24
3) 23
4) 22
5) None of these
226. The demutualised exchanges in India do not
include:
1) Bombay Stock Exchange
2) National Stock Exchange
3) OTCEI
4) Ahmedabad Stock Exchange
5) None of these
227. The Mutual Funds in India are regulated by:
1) RBI
2) SEBI
3) AMFI
4) IRDA
5) None of these
228. The Basel II Accord is based on the concept of
a capital ratio where the numerator represents
54
the required amount of capital by a bank and
the denominator:
1) The risk-weighted assets
2) Non-performing assets
3) Only (1) and (2)
4) All of the above
5) None of these
229. The Basel II accord differs from the earlier
accord by the introduction of an explicit
treatment for_______ in the definition of riskweighted assets:
1) Credit Risk
2) Operational Risk
3) Market Risk
1) one
2) two
5) None of these
3) three
4) four
5) None of these
233. ABC Bank has advanced Rs. 50,000 to a farmer
for cultivation of sugarcane crop in June 2010.
The borrower has repaid Rs. 25,000 plus
interest accrued on the entire loan promptly
after the harvest of sugarcane in June, 2011 and
informed the bank that he could not pay the
balance amount of loan as the crop was affected
by the disease resulting in a poor yield just
sufficient to pay a half of the loan availed by
him from the bank. How would the bank
recognise the balance loan outstanding in his
account for the purpose of asset classification
as on 30th June, 2011?
1) As a Standard Asset
2) As a Sub-Standard Asset
55
3) As a Doubtful Asset
1) 20%
4) As a Loss Asset
2) 30%
5) None of these
3) 50%
4) 100%
5) None of these
237. By financial inclusion, we mean provision of
___________ by the format financial system to
those who are hitherto excluded.
1) 90 days
2) 180 days
3) One year
4) Two years
5) None of these
5. None of these
1) Standard
2) Sub-standard
3) Doubtful
4) Loss
5) None of these
5) None of these
236. Banks shall make 100% provision against the
unsecured portion of a doubtful asset. In regard
to the secured portion and if the asset remained
in doubtful category for less than a year, a
provision of ______ may be made on the
amount of advance so secured:
56
5) None of these
240. The scope of the activities undertaken by the
business correspondents will include:
1) Disbursal of small-value credit
2) Recovery of loans and interest
3) Collection of small-value deposit
2) 2 months
3) 3 months
4) 4 months
5) None of these
244. Primary Dealers (PDs) deal in _______ in both
primary and secondary markets.
1) Equities
5) None of these
2) Debentures
3) Corporate Bonds
4) Government Securities
5) None of these
245. Urban Co-operative banks are controlled by
3) Ex-servicemen
5) None of these
1) 21 days
1) RBI
2) 30 days
2) SEBI
3) 1 month
3) AMFI
4) 2 months
4) IRDA
5) None of these
5) None of these
57
3) Of foreign Currency
4) Of the last resort
5) None of these
248. What is a financial system?
1) Financial system means a mechanism in an
economy to mobilise the monetary
resources/capital from various surplus
sectors of the economy and to allocate and
distribute the same to various needy sectors.
2) A system to access the demand and supply of
the finance.
3) An arrangement to finance the farmers of the
country.
4) A system to put financial management on the
borrowers of the schedule commercial banks
of the country.
5) None of these
249. Central Monetary Authority of India is:
3) Planning commission
5) None of these
5) None of these
250. Which of the following banks is not wholly
owned by the government of India?
3) Gorawala Committee.
4) Talwar Committee.
5) None of these
5) None of these.
58
1) 1935
2) 1949
3) 1955
4) 1969
5) 1947
255. On 19th July 1969, 14 banks were nationalised
these banks had deposits of more than:
1) Rs. 25 crore.
2) Rs. 75 crore
3) Rs. 85.crore
5) None of these.
5) None of these
59
1) 10% of such profit.
4) Talwar Committee
5) None of these
5) None of these
2) Sponsoring Bank.
1) Marathe committee
2) Narsimham Committee
5) None of these
3) Tondon committee
60
268. Regional Rural Banks are empowered to
transact the business of banking as defined under:
5) None of these
3) Intangible assets.
5) None of these
61
275. The regulatory authority for the activities of
Merchant Banker in India is :
1) Reserve Bank of India.
2) Ministry of Finance.
3) Securities and Exchange Board of Delhi.
4) Indian Banks Association.
5) All of the above.
276. What are major functions undertaken by
merchant bankers?
1) Issue Management.
2) Capital structuring/restructuring.
5) None of these
62
products and inputs and passengers to/from
marketing centres.
4) All of the above
5) None of these
282. NABARDs refinance is available
to
commercial banks under nonfarm sector for
investment activities of :
1) Artisans
2) Small scale industries, tiny sector, village
and cottage industries.
4) ECGC
5) None of these
5) None of these
283. The Industrial Finance Corporation of India is
the first institution established to build a term
financing institutional structure in India; it was
established in :
1) July 1948
2) IFCI
2) August 1969
3) IDBI
3) September 1957
4) ICICI
4) December 1970
5) None of these
5) None of these
63
288. The main functions of SIDBI are :
1) to provide refinance for loans and advances
extended by the primary lending institutions
to SSI units and also to provide resources
support to them.
2) It discounts and rediscounts bill arising from
sale of mechinery to or manufactured by
industrial Units in the SSI sector.
3) It extends seed capital/soft loan assistance
under National Equity Fund, Mahila Udyam
Nidhi and Mahila Vikas Nidhi and Seed
Capital Schemes through specified lending
agencies.
4) All of the above
5) None of these
289. The discount and Finance House of India
(DFHI) was established in April 1988 as per the
recommendations of :
1) Working group on Money Market headed by
Shri N.Vaghul.
2) Narsimham Committee on Banking reforms.
3) Reserve bank of India.
4) Only (2) and (3)
5) All of the above
290. Export-Import Bank of India was set up as a
statutory corporation, wholly owned by
government of India, in :
1) January 1981.
2) August 1947.
3) January 1984
4) January 1965
5) August 1965
64
2) Interest rate on foreign currency term loan
may be floating of fixed based on banks cost of
funds.
5) None of these
5) None of these
294. Under its foreign Currency Pre-shipment credit
(FCPC), Exim Bank gives short term foreign
currency finance to eligible exports for
procurement of inputs and to commercial banks
for on-lending to export customers; the terms of
finance are:
1) Interest rate on finance is maximum 2% over
LIBOR (London Inter Bank Offered Rate).
2) Maximum period of finance is 180 days
from the date of disbursement.
3) For commercial banks, loans availed from
EXIM Bank are exempted from the
requirement of Cash Reserve Ratio,
Statutory Liquidity requirement and
Incremental
Credit-deposit
ratio
requirements.
4) All of the above.
5) None of these
295. Unit trust of India (UTI) was set up under an
Act of Parliament in 1964, or Statutory Public
Sector Investment Institution. The objectives of
the institutions are:
1) To provide to the investors or small and
moderate means the same advantages of
investments as enjoyed by the large
capitalists.
2) To diminish or minimise the risk of
investment in stocks by spreading or
diversifying investments over a large
number of different kinds of stocks.
65
2) The Net Non-Performing Assets to the net
advances of the Bank should not exceed
10%
3) Bank of Madras
5) None of these
5) None of these
66
4) Reserve Bank of India
5) None of these
5) None of these
5) None of these
5) None of these
5) None of these
311. Section 26 of the Banking Regulation Act, 1949
requires every banking company to submit an
annual return to the Reserve Bank of India, in
respect of :
1) advances to agriculture sector.
67
2) all accounts in India which have not been
operated upon for ten years.
3) advances allowed to priority sector.
5) None of these
4) No limit of capital
5) None of these
315. The main thrust of the branch licensing policy
is :
1) to provide freedom to banks to rationalise
the structure of their branches.
5) None of these
5) None of these
316.
Narasimham
recommendations include:
committees
main
5) None of these
5) None of these
317. The Banks are required to constitute high
power liability management committees
comprising top executives to determine suitable
policies for:
68
1) each liability product such as demand
deposits, savings, term deposits and CODs.
2) liabilities denominated in foreign exchange.
3) monitoring ratio yield elastic and inelastic
liabilities in the total liabilities as also
supply statement of use of call money
borrowings.
4) All of the above
5) None of these
318. The world over most of the supervisory
authorities have adopted the following as the
basis of assessment of capital adequacy :
1) Risk assets ratio System.
2) Return or capital System.
3) Average Yield on Assets System.
5) None of these
2) 100%
1) Net capital
2) Gross capital.
3) Working capital.
4) Core capital.
5) None of these.
320. Tier-I capital would mean:
1) Paid up capital.
2) Statutory reserves and other disclosed free
reserves.
3) Capital reserves representing surplus arising
out of sale proceeds of assets.
cumulative
4) Net profit.
and
3) 200%
4) 75%
5) 82%
323. What do you mean by the money market?
1) A place where money is sold and bought.
2) It is nothing but a place where two
currencies are exchanged.
3) Money market is a market for short terms
financial assets (generally upto the tenure of
12 months) that are close substitutes of
money
4) All of the above
5) None of these
69
324. Who are the major players in the call money
markets?
1) Banks.
2) Insurance companies.
3) Development Financial Institutions
4) Selected Mutual funds
5) All of the above
325. Treasury Bill means:
1) a bill drawn on a treasury.
2) an instrument is used by the Central
government for shorterm borrowing.
3) a bill drawn by any authority by sitting in
treasury office.
4) a bill drawn by Member of Parliament.
5) All of the above
326. Who issues treasury bills?
1) Reserve Bank of India, as the agent of the
Central government
2) Any Government Department of State and
Central.
4) Commercial Bills
5) All of the above
328. Certificate of deposit refers to :
1) a certificate issued by reserve bank of India,
stating the amount of deposit held by a bank.
2) a certificate issued by regional Rural Bank of
its depositors.
3) a negotiable money market instrument,
issued in dematerialised form or as a
issuance promissory note, for funds
deposited at a bank or other eligible
financial institution for a specific time
period.
4) All of the above
5) None of these
329. How much is the minimum amount for issuance
of certificate of deposit?
1) It should not be less than Rs. 1 lakh and in
multiples of Rs. 1 lakh thereafter.
2) Rupees 1 crore and in multiples of Rs. 10
lakh, thereafter.
3) Rupees 10 lakh.
5) None of these
5) None of these
327. Which are the various instruments in the Indian
Money Market?
1) Call money and short notice money
instruments.
2) Inter bank term deposits/ loans.
3) Treasury Bills
70
5) 30 days from the date of issue
331. A commercial paper refers to :
1) an unsecured money market instrument
issued in the form of promis-sory note.
2) a paper issued by commercial organisations.
3) a secured money market instrument
4) a letter issued by scheduled commercial
banks for seeking refinance from NABARD.
5) None of these
332. Commercial paper can be issued by :
1) Corporates
2) All India financial Institutions that have been
permitted to raise short term resources under
the umbrella limit fixed by RBI
3) Primary dealers
4) All of the above
5) None of these
333. Commercial paper is :
1) fully secured instrument.
2) unserved money market instrument.
30 partly secured paper.
4) All of the above
5) None of these
334. Who can make investment in a commercial
paper?
1) Individuals.
2) Banking companies.
3) Corporate bodies registered or incorporated
in India and unincorporated bodies.
71
5) None of these
338. The Banking regulation act, 1949, applies to the
following categories of banks:
1) Nationalised Banks.
2) Non-nationalised Banks
3) Co-operative Banks.
4) All of the above
5) None of these
339. A Bank incorporated in India cannot open an
office outside India without obtaining prior approval
of
1) Government of India.
5) None of these
3) Exim Bank.
4) Joint Director of Foreign Trade
5) None of these
340. The provision of section 21 of the Banking
regulation act, 1949, empowers reserve Bank of
India to :
1) inspect the banking companies.
2) to regulate CRR and SLR.
3) control advances by banking companies.
4) All of the above
5) None of these
341. Section 26 of the Banking regulation Act, 1949,
requires every banking company to submit an
annual return to the reserve Bank of India, in
respect of :
1) all accounts in India which have not been
operated upon for ten years and above
72
2) the advance given by the banks to the
poorest of the society.
3) lending made under PMRY scheme
4) All of the above
5) none of these
345. In terms of section 19 of the RBI Act, 1934, the
RBI has been prohibited from:
1) making loans or advances
2) drawing or accepting bills payable otherwise
than on demand
3) allowing interest on deposits or current
accounts
4) All of the above
5) None of these
346. Cash reserve ratio is maintained in the form of :
1) Government securities.
5) None of these
73
4) All of the above
5) None of these
ANSWERS
3. 5) Germany
4. (1) IRDA
30. (4) 1%
for
International
Settlements
74
44. (4) It results into deflation
45. (4) RBI and banking Regulation Act
46. (5) Planning Commission
47. (3) Fluctuates with market price movements
48. (1) Amounts are deposited and are withdrawn as
per requirement of the customers.
65. (5) a, b, d, e
75
92. (1) Financial Literacy and Credit Counselling
132. NABARD
76
140. (3) The bank rate signals the central bank long
term outlook on interest rates. If the bank rate
moves up, long term interest rates also tend to
move up and viceversa.
77
178. (2) Indias International Bank
179. (2) Baroda Sun
180. (1) Know Your Customer Norms
181. (5) Mobile Phone
182. (4) All A, B and C
183. (1) Money Lenders
78
225. (2) 24
226. (4) Ahmedabad Stock Exchange
227. (2) SEBI
228. (1) The risk- weighted assets
229. (2) Operational Risk
230. (1) 90 days
231. (3) In the borrowers various advances accounts
with the Bank.
232. (2) two
233. (1) As a Standard Asset
234. (3) One year
235. (4) Loss
236. (1) 20%
237. (1) Affordable financial services
238. (4) Rs. 50000 and Rs. 1 lakh
239. (4) All of the above
240. (4) All of the above
241. (1) Insurance Agents
242. (2) 30 days
243. (4) 4 months
244. (4) Governments Securities
245. (1) State Governments and RBI.
246. (3) AMFI
247. (4) of the last resort
248. (1) Financial system means a mechanism in an
economy to mobilise the monetary
resources/capital from various surplus sectors
79
271. (4) All of the above
80
318. (1) Risk Assets Ratio System
81