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Online Question Bank Commercial Banking in India: A Beginner's Module

Roots Institute of Financial Markets


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Thanks for choosing RIFM as your guide to help you in NCFM/CFP Certification.

Roots Institute of Financial Markets is an advanced research institute Promoted by Mrs. Deep Shikha CFPCM. RIFM specializes in Financial Market Education and Services. RIFM is introducing preparatory classes and study material for Stock Market Courses of NSE, NISM and CFP certification. RIFM train personals like FMM Students, Dealers/Arbitrageurs, and Financial market Traders, Marketing personals, Research Analysts and Managers. We are constantly engaged in providing a unique educational solution through continuous innovation. Wish you Luck

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Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Our Team
Deep Shikha Malhotra CFP M.Com., B.Ed. AMFI Certified for Mutual Funds IRDA Certified for Life Insurance IRDA Certified for General Insurance PG Diploma in Human Resource Management CA. Ravi Malhotra B.Com. FCA DISA (ICA) CM CERTIFIED FINANCIAL PLANNER Vipin Sehgal CFP B.Com. NCFM Certification In Capital Market AMFI Certified for Mutual Funds IRDA Certified for Life Insurance
CM CM

(Dealers) Module

Neeraj Nagpal CFP B.Com. AMFI Certified for Mutual Funds IRDA Certified for Life Insurance NCFM Certification In: Capital Market (Dealers) Module Derivatives Market (Dealers) Module Commodities Market Module Kavita Malhotra M.Com. Previous (10th Rank in Kurukshetra University) AMFI Certified for Mutual Funds IRDA Certified for Life Insurance Certification in all Modules of CFPCM Curriculum (FPSB

CM

India)

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Commercial Banking in India: A Beginner's Module Examination


Exam Pattern
Test Duration No. of Questions Maximum Marks Pass % Negative Marking % 120 Min. 60 100 50 No

Roots Institute of Financial Markets


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Commercial Banking in India: A Beginner's Module

Index
Chapter No. 1 2 3 4 5 6 7 8 Title Introduction Banking structure in India Bank Deposit Accounts Basics of Bank Lending Bank Investments Other Activities of Commercial Banks Relationship between Bank and customer Evolving Trends in modern Banking Sample Paper 1 Sample Paper 2 Sample Paper 3 No. of Questions 37 62 140 94 51 70 63 37 60 60 60

Roots Institute of Financial Markets


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Chapter 1 Introduction
Why bank play special role in economy? 1 S R

Because they take a leading role in developing other financial intermediaries and markets. Because, the corporate sector depends heavily on banks to meet its financing needs Because bank cater the needs of a vast number of savers from the household sector All of the above Yes

Which of the following risk is managed by banks?

1 Yes

S R

Financial risk Non-financial risk Both None

In India definition of the business of banking has been 1 given in the_________?

S R

Banking regulation act 1950 Banking regulation act 1949 Banking regulation act 1956 Banking regulation 1969 Yes

Functions of commercial banks are same as from the 1

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other financial institution. True False Yes

Which of the following function of a commercial bank 1 different from the other financial institution?

S R

Bank maintain deposit accounts including current accounts Issue and pay cheques Collect cheques for the bank's customers All of the above Yes

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Chapter 2 Banking structure in India


_______ Banks have taken lead role in branch 1 expansion, particularly in the rural areas? Yes S R

11

Public sector Private sector Rural sector Co-operative sector

12

__________ banks account for bulk of the branches of 1 in India?

S R

Regional rural banks Scheduled banks Public sector banks Nationalized banks Yes

13

_________ banks have limited presence in rural 1 areas?

S R

Foreign banks Private banks Both None Yes

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14

Regional rural banks were established_________

S R

During 1975-1987 During 1976-1987 During 1978-1987 During 1974-1987 Yes

15

Which of the following authorities owns RBB?

S R

Central government State government Public sector All of the above Yes

16

RRB not provides credit to________.

S R

Small farmers Artisan Agricultural laborers None of the above Yes

54

What types of product offered by foreign banks?

S R

Automobiles finance Home loans Household consumer finance All of the above Yes
Roots Institute of Financial Markets
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55 True False

RBI includes only those banks in this schedule which 1 satisfy the criteria as laid down section 42(6) (a) of the act. Yes

S R

56

RBI controls the commercial banks through

S R

Periodic inspection of banks Follow up action Calling for returns and other information All of the above Yes

57 FALSE TRUE

Under the new system, the RBI acts as the banker to 1 Central Government only, not banker to State Governments. Yes

S R

58 FALSE TRUE

Hindu Undivided Families (HUFs) are not allowed to 1 open current accounts. Yes

S R

59 TRUE

Public sector banks are not allowed to enter the mutual 1 fund business.

S R

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FALSE

Yes

Roots Institute of Financial Markets


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Chapter 4 Basics of Bank Lending


Bank act as __________of public deposits. 1 S R

Depository Custodian Lender Banker Yes

6 Safety Liquidity

Which of the following is the principle of lending

S R

Profitability All of the above Yes

Which type of security not used against loan?

S R

Adequate Free of encumbrances Marketable None of the above Yes

The DICGC can withdraw the deposit insurance cover 1 for a bank if it fails to pay the premium for __________periods. Yes

S R

Three consecutive half year

Roots Institute of Financial Markets


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Four consecutive 1 year Two consecutive half year One consecutive half year

Which of the following entity prepare the basic credit 1 policy of the bank?

S R

Banks board of director Credit policy committee IBA(Indian bank of association) RBI Yes

10

In which areas loan policy typically lays down lending 1 guidelines?

S R

Level of credit-deposit ratio Hurdle ratings Targeted portfolio mix All of the above Yes

51

__________are repositories of information, which 1 contains the credit history of commercial and individual borrowers.

S R

Credit risk management department Credit Committee Credit information report Credit information bureau Yes
Roots Institute of Financial Markets
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52

Credit information bureaus collect commercial and 1 consumer credit related data and collate such data to create credit reports, which they distribute to their Members. Yes

S R

True False

53

_________is a factual record of a borrower's credit 1 payment history compiled from information received from different credit grantors.

S R

Credit risk management report Credit Committee Credit information report Credit information bureau Yes

54

The purpose of _______ is to help credit grantor make 1 informed lending decision? Yes

S R

Credit information report Credit risk management report Credit Committee None of the above

55 True False

Banks do not need to constantly keep a check on the 1 overall quality of the loan portfolio.

S R

Yes
Roots Institute of Financial Markets
1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Chapter 6 Other Activities of Commercial Banks


The main para-banking activities of a bank can be 1 segreted into: (1)Investment banking service (2)Selling mutual funds (3)Selling insurance products Yes S R

1,2,3 1,2 2,3 1,3

2 True False

Forward foreign exchange transaction entered into with 1 corporate and non-corporate customer and counterparty banks for the purpose of hedging and trading. Yes

S R

3 Option Swaps Both None

Which of the following product derived from the foreign 1 exchange market or the interest rate market?

S R

Yes

Option and swaps are tailor made products designed to 1

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

meet specific risk hedging requirements of the customer. True False Yes

43

Which of the following is primary objective of the DP 1 system?

S R

Enhance liquidity and turnover Improve secondary market trading system Encourage voluntary holding of government securities All of the above Yes

44

Which of the following criteria fulfill by banks to do PD 1 business?

S R

Minimum net owned funds of Rs. 1000 crores Minimum CRAR of 9% Net NPAs of less than 3 % and a profit making record for the last three years All of the above Yes

45 True False

Merchant Banking and Investment Banking are same.

S R

Yes

46

Banks and Financial Institutions including Non Banking 1 Finance Companies (NBFCs) providing merchant banking services are governed by the RBI Rules and

S R

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Regulations. True False Yes

47 True False

Indian only the player of investment banking.

S R

Yes

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Chapter 7 Relationship between Bank and customer


Widespread distribution is not the key dimension of the 1 retail strategy of bank. S R

15 True False

Yes

16

Cross selling of the entire range of credit and 1 investment products and banking services to customers is a key aspect of the Product Life Cycle Strategy.

S R

True False Yes

17 Saving Retail Both None

________ Deposits are usually more stable than 1 corporate bulk deposits or wholesale deposits.

S R

Yes

18

Which of the following retail product not offer by bank?

S R

Automobile loans Loans against time deposits

Roots Institute of Financial Markets


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Two wheeler loans None the above Yes

19 Secured

Personal loans are________.

S R

Unsecured Both None

Yes

52

Which of the following are the key elements should be 1 incorporated while banks frame their KYC?

S R

Customer Acceptance Policy Customer Identification Procedures Monitoring of Transactions All of the above Yes

53 True False

Driving license document use for opening deposit 1 accounts under KYC guidelines. Yes

S R

54

Normally what kind of customers may not be 1 categorized as low risk?

S R

Salaried employees Government owned companies


Roots Institute of Financial Markets
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Regulators Politically exposed persons Yes

55

Which type of customer require higher due diligence?

S R

Non-resident customers High net worth individuals Firms with 'sleeping partners All of the above Yes

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Chapter 8 Evolving Trends in modern Banking


Customer can pay various taxes online including 1 Excise and Service Tax, Direct Tax etc. Yes S R

4 True False

________is an inter bank-funds transfer system, where 1 funds are transferred as and when the transaction are triggered.

S R

Register and pay Online payment RTGS fund transfer Any of the above Yes

The RBI has adopted________ in which mobile phone 1 banking is promoted through business correspondents of banks. Yes

S R

Bank led model Point of sale Internet banking POS terminal

When banks did have been granted permission to 1 operate Mobile Banking in India?

S R

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

July 30,2008 July 30,2009 May 15,2008 May 30,2009 Yes

8 30 15 20 32

How many banks had been granted permission to 1 operate mobile banking in India?

S R

Yes

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Sample Paper 1
1 In India definition of the business of banking has been 2 given in the_________? S R

Banking regulation act 1950 Banking regulation act 1949 Banking regulation act 1956 Banking regulation 1969 Yes

Which of the following entity is the central bank and 1 monetary authority of India?

S R

State bank of India SEBI RBI PNB Yes

3 2 3 4 5

How many components intermediation process has?

an

efficient

financial 1

S R

Yes

For whom bank credit is provided?

S R

Household
Roots Institute of Financial Markets
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Retail traders Small and medium enterprises All of the above Yes

The imperial bank of India was established with 1 mainly_____?

S R

Indian shareholder Japan shareholder European shareholder All of the above Yes

57

_____ And ____ are two major companies in the 2 mortgage business and provide stiff competion to the commercial banks in the disbursal of housing loans.

S R

NEDFI, HDFC NEDFI, HUDCO HDFC, HUDCO LIC, HUDCO Yes

58

In India, the RBI prescribes the minimum SLR level for 3 Scheduled Commercial Banks in India in specified assets as a percentage of Bank's ______ Yes

S R

Net Demand and Time Liabilities Demand Liabilities Time Liability None of the above

Roots Institute of Financial Markets


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59

How does a bank endeavor to provide services to the 2 satisfaction of customers?

S R

Banks put in place an expeditious mechanism to redress the Yes complaints of the customers By appointing Customer Relationship Managers (CRMs) Products are developed by banks to meet the specific requirements of the customer All of the above

60 TRUE FALSE

Public sector banks are not allowed to enter the mutual 1 fund business.

S R

Yes

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Sample Paper 2
5 Which sector has been the most significant contributor 1 to savings? S R

Private corporate sector Household sector Public sector All of the above Yes

6 Safety Liquidity

Which of the following is the principle of lending

S R

Profitability All of the above Yes

7 SLR Non-SLR CRR

Commercial papers, shares, bonds and debenture 3 issued by the corporate sector categorized into______

S R

Yes

Any of the above

The RBI has adopted________ in which mobile phone 2 banking is promoted through business correspondents of banks.

S R

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Bank led model Point of sale Internet banking POS terminal

Yes

Who formulate the policies relating to the rates of 1 interest payable on deposit?

S R

Board of director Top management Both Any of the above Yes

10 Assets Liabilities Both None

In terms of bank SLR is prescribed as_____.

S R

Yes

36

Which of the following is not the principal competitor in 2 the agriculture and priority segment?

S R

Large public sector banks Regional rural banks Cooperative banks Commercial banks Yes
Roots Institute of Financial Markets
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37 FALSE TRUE

A commercial paper issue made by a corporate is a 2 non-SLR instrument

S R

Yes

38 75% 60% 65% 74%

Indian partners hold at least _____of Indian insurance 2 joint venture.

S R

Yes

39

The rural co-operative banks comprises_________.

S R

PCARDBs District central co-operative bank SCARDBs All of the above Yes

Roots Institute of Financial Markets


1197 NHBC Mahavir Dal Road. Panipat. 132103 Haryana. Ph.99961-55000, 0180-2663049 email: info@rifm.in Web: www.rifm.in

Sample Paper 3
11 True False Yes Product life cycle strategy is not the key components of 1 strategies to expand and retain the customer base. S R

12 RBI

Who determine the interest rate on NRE account?

2 Yes

S R

IBA(Indian bank of association) Both None

13

Banks decision to be outsourced some of their 2 activities should be on______.

S R

Cost consideration Lack of expertise in banks in delivering certain services Concentrate on their core activates All of the above Yes

14 FALSE TRUE

Hindu Undivided Families (HUFs) are not allowed to 1 open current accounts. Yes

S R

Roots Institute of Financial Markets


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15

If any, payable for processing the loan, the amount of 2 such fees not refundable in the case of_________.

S R

Non-acceptance of application Prepayment options Both None Yes

52

___________terminal is the instrument in which the 2 credit card is swiped

S R

Point of buy Point of sale MICR All of the above Yes

53

Why is the RBI called as the bankers of bank?

S R

It lends the banks funds for short period It provides them with centralized clearing and cheap and quick remittance facilities It holds a part of the cash reserves of banks All of the above Yes

54

What is the purpose of measure taken in July 1993?

S R

To induce competition in banking sector Permit to private sector to enter into banking system Both Yes
Roots Institute of Financial Markets
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None

Roots Institute of Financial Markets


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