Banking Awareness MCQ Test!

The statement is true because RTGS (Real-Time Gross Settlement) is a payment system where transactions are settled individually and immediately, meaning the funds are transferred in real-time and on a gross basis. On the other hand, NEFT (National Electronic Funds Transfer) operates on a deferred net settlement basis, where transactions are processed in batches and settled at specific intervals throughout the day. This means that funds are not transferred immediately, but rather accumulated and settled in a net amount at regular intervals. Therefore, the statement accurately describes the settlement processes of RTGS and NEFT.

Crossing is not applicable for all negotiable instruments. Crossing refers to the process of drawing two parallel lines across the face of a check or other negotiable instrument, which signifies that the instrument can only be deposited directly into a bank account and cannot be cashed over the counter. While crossing is commonly used for checks, it may not be applicable or necessary for other negotiable instruments such as promissory notes or bills of exchange. Therefore, the statement "Crossing is applicable for all negotiable instruments" is false.

The correct answer is 5 crore per borrower from `1 crore. This means that the limit of loans given to dealers/sellers of fertilizers, pesticides, seeds, cattle feed, poultry feed, agricultural implements, and other inputs has been increased from 1 crore to 5 crore per borrower.

The given answer states that none of the options are incorrect. This means that all of the mentioned committees are correct and there are no errors or inaccuracies in the information provided.

Commercial Papers are short-term debt instruments issued by corporations, not banks. These papers are typically unsecured and are used by companies to raise funds for their short-term financing needs. Banks, on the other hand, issue various other financial instruments such as certificates of deposit (CDs), bonds, and loans. Therefore, the statement that Commercial Papers are issued by banks is incorrect.

CAR

The correct answer is 25 lakhs to 50 lakhs. This means that the limit of loans to farmers against pledge/hypothecation of agricultural produce has been increased from 25 lakhs to 50 lakhs. This increase applies to both direct and indirect agriculture, and the loan period should not exceed 12 months.

The statement is false because not just any entity can issue a promissory note for mercantile purposes. According to the Negotiable Instruments Act, only certain entities such as banks and financial institutions are authorized to issue promissory notes. These entities must meet certain legal requirements and regulations in order to issue such instruments. Therefore, the statement is incorrect.

The correct answer is 50000 because it states the maximum credit limit for microfinance is Rs. 50,000.

The statement is false because not all paper currency is issued by the Reserve Bank of India (RBI). In many countries, the central bank is responsible for issuing currency, but there are also instances where commercial banks are authorized to issue their own paper currency. Additionally, in some countries, the government itself may be responsible for issuing paper currency. Therefore, it is incorrect to claim that all paper currency is issued by the RBI.

The 14-day Treasury Bills (TBs) are not auctioned as a present. This means that they are not currently being auctioned. The other options, 91-day, 182-day, and 364-day TBs, are all auctioned, indicating that they are currently being sold through an auction process.

Based on Transferability & Negotiability Concept

The correct answer is 2008. The Limited Liability Partnership (LLP) Act was enacted in 2008. This act introduced the concept of a limited liability partnership in India, allowing professionals and entrepreneurs to form a business entity that combines the benefits of a partnership and a corporation. The LLP Act provides partners with limited liability protection, meaning their personal assets are protected in case of business debts or legal issues. This act aimed to promote entrepreneurship and facilitate ease of doing business in India.

The given statement is false. The Banking Regulation Act 1949 does not define 'banking' in Section 6(b).

Under Asset Liability Management (ALM), Liquidity Risk is managed based on the Residual Period of Maturity for Time Deposit. This means that the bank or financial institution assesses the remaining time until the time deposit matures in order to determine the liquidity risk associated with it. By considering the residual period of maturity, the institution can make informed decisions about managing its liquidity and ensuring that it has sufficient funds to meet its obligations when the time deposit matures.

The given question is asking which of the options is incorrect in respect of committees on various aspects of banking development set up in recent past. The correct answer is "None is incorrect" because all of the options listed are correct in respect of the committees mentioned. This means that there is no option that is incorrect in relation to the committees on banking development.

The acronym 'CRE' stands for Commercial Real Estate. This refers to properties that are used for business purposes, such as office buildings, retail spaces, and industrial facilities. Commercial real estate is distinct from residential real estate, which is used for housing purposes.

The statement is false because while the Bank Rate is determined by the Reserve Bank of India (RBI), the Base Rate is determined by individual banks. The Bank Rate is the rate at which RBI lends to commercial banks, while the Base Rate is the minimum rate at which banks can lend to their customers.

The correct answer is 5 crore. This means that the loan limit for micro and small enterprises in the service sector is 5 crore rupees. This indicates that these enterprises can borrow up to 5 crore rupees for their business needs.

The correct answer is a+b+c. This means that all of the options (AFS, HFT, and HTM) are correct in respect to the categorization of the investment portfolio of banks for the purpose of valuation. This suggests that banks can categorize their investment portfolio as Available For Sales, Held For Trading, and Held To Maturity, depending on the nature and purpose of the investments.

The given statement states that banks may hold more than 25% of total investment under the HTM category. It also mentions that excess comprises of SLR securities and that the total SLR securities held in the HTM category has been aligned to the current SLR requirement. Additionally, it states that the total SLR securities held in the HTM category is not more than 23% of the bank's DTL based on the recommendation of the committee headed by Shri R. Gandhi. The answer states that none of these statements are incorrect, implying that all of them are true.

The correct answer is "Management" because in the "CAMELS" rating system for banks, the letter "M" represents the evaluation of the bank's management. This includes assessing the bank's leadership, governance, and decision-making processes. The rating evaluates the effectiveness and competence of the bank's management in achieving the bank's objectives and ensuring the safety and soundness of its operations.

Under the Companies Act 1956, when a charge is created in favor of a creditor on the assets of a company, it must be filed for registration with the Registrar of Companies (ROC) within 30 days. This ensures that the charge is properly recorded and acknowledged by the relevant authorities, providing legal protection to the creditor in case of any disputes or claims on the company's assets. Failing to file within the specified timeframe may result in the charge being considered invalid or unenforceable.

An overdue time deposit refers to a situation where a customer fails to withdraw their funds from a time deposit account after the maturity date. In this case, the bank is liable to return the funds to the customer upon request. Therefore, it is considered an outside liability as it represents an obligation of the bank to external parties. Additionally, it is also classified as a demand liability because the customer can demand the return of their funds at any time.

All the statements provided in the question are relevant because they provide information about the original investment in plant and machinery for different types of enterprises. Each statement specifies the maximum investment limit for a particular type of enterprise, whether it is a micro service enterprise, small service enterprise, micro manufacturing enterprise, or small manufacturing enterprise. Therefore, all the statements are relevant as they contribute to the understanding of the investment limits for different types of enterprises.

The correct answer is 40, MSMED. According to the Micro, Small, and Medium Enterprises Development (MSMED) Act 2006, domestic commercial banks are required to have an overall target of lending to the priority sector, which includes the MSMED sector. The target is set at 40% of Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposure (CEOBE) of the previous year, whichever is higher. This ensures that banks provide adequate financial support to the priority sector, particularly the MSMED sector, which plays a crucial role in the country's economic growth and employment generation.

The correct answer is 300. The Marginal Standing Facility (MSF) rate is currently 300 basis points higher than the Repo Rate.

The Standard Approach is common to measure Credit Risk, Market Risk, and Operational Risk under the Basel II accord. This approach requires banks to use standardized formulas and risk weights provided by regulatory authorities to calculate their capital requirements for these risks. It provides a consistent method for banks to assess and manage their risks, ensuring a level playing field and comparability across different institutions.

The question is asking for the category in which Treasury Bill belongs. Treasury Bills are short-term debt instruments issued by the government to raise funds. They are typically traded in the money market, which deals with short-term borrowing and lending of funds. Therefore, Treasury Bills belong to the Money Market. However, it is important to note that Treasury Bills can also be considered part of the Debt Market since they are a form of debt instrument. Additionally, Treasury Bills can be bought and sold in the Forex Market if they are denominated in a foreign currency. Therefore, the correct answer is Money Market, Debt Market, Forex Market, None.

The correct answer is "only 1 nominee irrespective of the no of account holders in a particular account". This means that regardless of the number of account holders, there can only be one nominee for the bank deposit account.

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The margin requirement for assessment of working capital advance under the "Turnover Method" of lending is 5% of acceptable projected turnover or Net Working Capital, whichever is higher. This means that the lender will require a margin of either 5% of the projected turnover or 5% of the net working capital, depending on which amount is higher. This margin acts as a buffer for the lender to mitigate any potential risks associated with the loan and ensures that there is enough collateral to cover the loan amount.

The correct answer is "Current Ratio under 1st method of lending of Tandon Committee is 1.33:1". This is because the question asks for the incorrect option in respect of the Minimum Current Ratio. The other options mentioned in the question are either correct or not related to the Minimum Current Ratio.

The correct answer is NRLM (National Rural Livelihoods Mission). The question asks for the replacement of the Poverty Alleviation Scheme "SGSY". Out of the given options, NRLM is the most relevant replacement as it is a government scheme aimed at reducing poverty by promoting self-employment and providing sustainable livelihood opportunities to the rural poor. SJSRY (Swarna Jayanti Shahari Rozgar Yojana) and MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) are not direct replacements for SGSY. SRMS is not a recognized scheme in this context.

The Indian Stamp Act 1899 governs the payment of stamp duty on certain types of documents. The documents listed in the question, such as Money Receipt, DP Note, Acknowledgement of Liability, and Usance Promissory Note, are all governed under the Indian Stamp Act 1899. However, an Agreement of Indemnity is not governed under this act.

The Provision Coverage Ratio (PCR) for Non-Performing Assets (NPA) refers to the percentage of provisions made by a bank or financial institution to cover potential losses from NPAs. A higher PCR indicates a higher level of provisions and a better ability to absorb losses. Therefore, a PCR of 70% suggests that the bank has made provisions to cover 70% of potential losses from NPAs, indicating a relatively strong position in managing and mitigating these risks.

The Working Group chaired by Shri B. Mahapatra is associated with reviewing the existing prudential guidelines for restructuring of advances by banks / FIs.