1.

A banker should not grant loans and advances against (c) (a) Unquoted shares (b) Partly paid-up shares (c) Its own shares (d) Third partys shares 2. In the case of a life policy, the banker should see (d) (a) The existence of insurable interest (b) The surrender value (c) The admission of age (d) All of the above 3. The most risky document of title to goods from the bankers point of view is (c) (a) Delivery order (b) Bill of lading (c) Warehouse keepers certificate (d) Railway receipt 4. A legal title over shares is created (d) (a) By simply depositing the shares (b) By depositing the shares along with a blank transfer (c) By depositing shares along with a memorandum (d) By executing a transfer deed 5. The rules framed in the Claytons case have been incorporated in (c) (a) The Banking Regulation Act (b) The Reserve Bank of India Act (c) The Indian Contract Act (d) The Negotiable Instruments Act 6. The limitation period in case of a bank deposit begins from (b) (a) The date on which deposit was made (b) The date on which the demand for payment was made (c) The date on which first withdrawal is made (d) None of the above 7. When a debtor owes several debts to a banker and makes a payment, the right of appropriation lies with (b) (a) The banker (b) The debtor (c) The court (d) None of the above 8. A Garnishee order is served on A and B jointly. They maintain a joint account as well as individuals accounts with the bank. The order shall attach (c) (a) Only the joint account of A and B (b) Only the individual accounts of A and B (c) The joint as well as individual accounts of A and B (d) None of the above 9. In terms of Section 31 of the Reserve Bank of India Act, 1934 a demand draft payable to bearer may be issued only by (c) (a) Nationalised Banks (b) Scheduled Commercial Banks (c) Reserve Bank of India (d) Foreign Banks 10. The payment of a lost demand draft is made to the (a) (a) Purchaser (b) Payee (c) Nominee (d) None of the above 11. In case of original demand draft is presented after the duplicate has already been paid, the bank will (a) (a) Pay the original demand draft as well and recover the amount from the purchaser

on the strength of the indemnity bond (b) Return with remarks Draft reported lost, duplicate already paid will pay on collecting banks guarantee. In case the original draft is again presented, it should be honoured. (c) Return with the remarks payment stopped by the payee (d) None of the above 12. Unsigned demand draft is presented for payment, the drawee branch will (b) (a) Honour it (b) Dishonour it since it does not have a mandate of the drawer bank to pay it. (c) Honour it after seeking confirmation from the collecting bank (d) Honour it if it is for small amount 13. Travellers cheques are valid for (d) (a) Three months (b) Six months (c) One year (d) No limit-are valid till encashed
312 Banking

14. Do the banks issue travellers cheques to non-customers also? (a) (a) Yes (b) No (c) No - only people of repute (d) No - only to people having annual income above Rs. 60,000 15. Are the travellers cheques subject to stamp duty in India? (b) (a) Yes (b) No (c) Yes, all travellers cheques above the value of Rs. 1,000 (d) Yes, all the travellers cheques above the value of Rs. 5,000 16. Minimum balance required to be maintained for cheque book facility (d) (a) Rs. 100 (b) Rs. 200 (c) Rs. 500 (d) Rs. 1000 17. The committee on Banking Sector Reforms under the chairmanship of Sri. M. Narasimham was appointed in (c) (a) 1991 (b) 1995 (c) 1998 (d) 1999 18. The Government of India passed the Recovery of Debts due to Banks and Financial Institutions Act in (a) (a) 1993 (b) 1992 (c) 1994 (d) 1990 19. Where the Apellate Tribunal for recovery of debts due to banks and financial institutions is set up? (c) (a) Chennai (b) Bangalore (c) Mumbai (d) Kolkata 20. Documentations is (a) (a) Proper execution of documents (b) Stamping of document (c) Cancellation of stamps (d) None of the above 21. Collateral securities can be (d) (a) Tangible (b) Intangible in the shape of personal guarantee of a third party (c) None of the above (d) Both of the above 22. The Central Bank of India is (a) (a) The Reserve Bank of India (b) The State Bank of India

(c) The Andhra Bank (d) Global Trust Bank

23. Stock exchange securities do not include (d) (a) Debentures of companies (b) Small debentures issued by port trusts (c) Government promissory notes (d) Participation certificates 24. Under Section 19(i) a banking company can hold shares in a limited company to the extent of (c) (a) The paid-up capital and free reserve of that company (b) The paid-up capital of the bank (c) 30% of the paid-up capital of the company or 30% of its own paid-up capital and reserves which ever is higher (d) 30% of the paid-up capital of the company or 30% of its own paid-up capital and reserves which ever is higher 25. The Definition of Banking is given in (c) (a) Negotiable Instrument Act, 1881 (b) RBI Act, 1934 (c) The Banking Regulation Act, 1949 (d) Contract Act 26. When was SBI established ? (d) (a) April 1, 1935 (b) July 31, 1969 (c) May 5, 1955 (d) July 1, 1955 27. Presently, the number of the public sector banks in India is (c) (a) 8 (b) 20 (c) 28 (d) 14 28. The maximum number of partners in a non-banking partnership firm is (a) (a) 20 (b) 10 (c) 25 (d) 11 29. Which of the following banks are not commercial banks ? (b) (a) Foreign Banks (b) State Co-operative Banks (c) Private Banks (d) Regional Rural Banks 30. Regional rural banks are managed by (c) (a) The Central Government (b) The RBI (c) The Board of Directors (d) The State Government 31. Under which of the following methods of note-issue the RBI issues notes? (c) (a) Fixed Fiduciary System (b) Maximum Fiduciary System (c) Minimum Reserve System (d) Proportional Reserve System
Multiple Choice Question with Answers 315

32. Cash deposit ratio means (a) (a) The percentage of cash-in-hand-balance with the Central Bank to the aggregate deposits (b) The percentage of total cash money received as deposits by banks (c) All the above (d) None of the above 33. Lead Bank Scheme was introduced in (b) (a) 1965 (b) 1969 (c) 1981 (d) 1992 34. A rise in the reserve ratio of banks (c) (a) Will lead to an increase in the money supply

(b) Will lead to a proportionate increase in the money supply (c) Will lead to a decrease in the money supply (d) None of these 35. Negotiable Instruments Act contains Sections as (b) (a) 137 (b) 142 (c) 138 (d) 141 36. Presently which bank is having the largest number of foreign branches? (c) (a) SBI (b) Canara Bank (c) Bank of Baroda (d) Bank of India 37. A usance bill can be drawn for a minimum period of (a) (a) 1 day (b) 2 days (c) 3 days (d) 4 days 38. Savings bank deposits are exempted from wealth tax up to (b) (a) 2 lakhs (b) 5 lakhs (c) 10 lakhs (d) 20 lakhs 39. The amount of unclaimed bankers cheques is credited to (d) (a) Respective LHO (b) Respective Module (c) Charges A/c (Misc) (d) Commission A/c 40. SBI is having maximum number of foreign offices in (b) (a) U.S.A. (b) U.K. (c) West Germany (d) Japan 41. How many export processing zones are in India? (b) (a) 5 (b) 6 (c) 7 (d) 8
316 Banking

42. FCNR accounts can be opened and maintained as (c) (a) Current Accounts (b) Savings Bank Accounts (c) Term Deposit Accounts (d) Recurring Deposits 43. In the case of FCNR accounts the payment of interest is effected in (c) (a) Indian Rupee (b) Only in Pound () (c) Same currency in which deposit stands (d) Yen 44. What comprises financial statement ? (d) (a) Profit and Loss Account (b) Balance sheet (c) Funds-flow-statement (d) All the above 45. Profit and Loss Account represents (d) (a) Position of profit on a particular date (b) Position of profit for a given period (c) Position of loss for a given period (d) B and C above 46. Balance sheet is (a) (a) Statement of assets and liabilities on a particular date (b) Statement of profit and loss on a particular date (c) Position of cash balance (d) Statement of assets and liabilities for a particular year 47. Balance sheet analysis helps in (d) (a) Ratio analysis (b) Trend (c) Inter-firm comparison (d) All the above 48. Banks are required to maintain SLR under (a) (a) Section 24 of the Banking Regulation Act

(b) Section 49 of the Banking Regulation Act (c) Section 24 of RBI Act (d) None of the above 49. CRR is required to maintain in the form of (b) (a) Approved Government Securities (b) Cash with RBI (c) Cash with bank (d) All the above
Multiple Choice Question with Answers 317

50. Working capital requirement depends upon (c) (a) Level of activity (b) Types of business carried (c) All the above (d) None of the above 51. For which of the following categories the payment can be stopped ? (b) (a) Gift cheque (b) Cheque (c) Bill of Exchange (d) Promissory Notes 52. The introducer is liable to the bank under the (b) (a) Indian Penal Code (b) RBI Act (c) Contract Act (d) NI Act 53. Cheque bearing Non-negotiable crossing is endorsed to other person. In this case the endorsee becomes (a) (a) Holder for value (b) Holder in due course (c) Holder only (d) Endorsee only 54. Which of the following are legal tender? (c) (a) Drafts (b) Cheques (c) Currency notes (d) Government drafts 55. In which of the Acts specimen of the cheque, bill, promissory note is given? (d) (a) Negotiable Instruments Act (b) Banking Regulation Act (c) Mercantile Law (d) None of the above 56. Which of the following negotiable instruments can be crossed to the banks? (c) (a) Cheques (b) Drafts (c) Bills of Exchange (d) All the above 57. Which of the following can be issued payable to bearer? (a) (a) Cheque (b) Draft (c) Bill of Exchange (d) Demand Promissory Notes 58. Protection is available to the collecting bank for the following (d) (a) Bill of Exchange (b) Promissory Note (c) Usance Bills (d) Cheque 59. Crossing denotes (d) (a) Cheque cannot be transferred by the payee. (b) A direction to the paying bank to pay the Cheque through a bank. (c) Cheque will be paid through clearing only. (d) Not payable across the counter but will be credited to the account of the holder. 60. A Non-negotiable crossing is a (a) (a) General crossing (b) Special crossing (c) Restricted crossing (d) Non-transferable crossing 61. A minor is admitted to the partnership firm as (d) (a) Agent (b) Partner (c) Minor (d) Beneficiary 62. Legal guardian of minor is (b)

(a) Nominated by the court for legal decision (b) Appointed by the court (c) Natural guardian (d) Executor-administrator appointed by the court 63. A share holder has been defined by (b) (a) The Banking Regulation Act, 1949 (b) The Companies Act, 1956 (c) The Securities Contract Regulation Act, 1956 (d) Indian Contract Act 64. What is the maximum period for which a Public Limited Company can raise deposits from the public? (c) (a) 12 months (b) 18 months (c) 36 months (d) 24 months 65. Group of companies/firms/associates is defined in (a) (a) Companies Act (b) Sale of Goods Act (c) Contract Act (d) Partnership Act 66. Which of the following cheques if paid do not get statutory protection? (b) (a) Bearer cheques (b) Open cheques (c) Stolen cheques (d) All the above 67. Period of limitation for deposits starts from (b) (a) Date of the cheque (b) Date of presenting cheque on the counter (c) Date of making deposits (d) Date of refusal by the bank 68. Who supplies interest-charts for different maturities and for different rates of interest ? (a) (a) IBA (b) RBI (c) Government of India (d) IBRD
318 Banking

69. The minimum period under which a term deposit under Reinvestment Plan can be issued is (c) (a) 24 months (b) 12 months (c) 6 months (d) 9 months 70. Rates of Interest on deposits are determined by (c) (a) IBA (b) Ministry of Finance (c) RBI (d) Government of India 71. Interest on the savings bank accounts is compounded (d) (a) Monthly (b) Yearly (c) Quarterly (d) Half-yearly 72. What is the limitation of the number of persons in a joint savings bank account? (d) (a) Two (b) Four (c) Five (d) No limit 73. The minimum average balance required to be maintained in a current account to avoid payment of ledger fee is (b) (a) Rs. 500 credit (b) Rs. 1,500 credit (c) Rs. 1,500 debit (d) Rs. 2,000 credit 74. Current account becomes dormant when there are no withdrawals for the last (b) (a) 3 months (b) 6 months (c) 12 months (d) 18 months

75. How do you consider Joint Hindu Family? (a) (a) Legal entity (b) Association of persons (c) Partnership concern (d) All the above 76. Maximum period of a usance bill considered by bank is (a) (a) 6 months (b) 9 months (c) 12 months (d) 24 months 77. Which of the bills has no grace period? (d) (a) Demand bill (b) Clean bill (c) Sight bill (d) All the above 78. After acceptance, the primary liability on a Bill of Exchange is that of (b) (a) Payee (b) Acceptor (c) Drawee (d) Endorsee
Multiple Choice Question with Answers 319 320 Banking

79. Which of the following are accommodation bills? (a) (a) House bills (b) Bills representing trading transactions (c) Bills accepted with consideration (d) None of the above 80. Under the Sale of Goods Act, a warehouse-keepers certificate is a (c) (a) Contract of sale (b) Contract of pledge (c) Document of title to goods (d) Contract of lease 81. The Government derives maximum revenue from (d) (a) Income tax (b) Customs (c) Sales tax (d) Excise duty 82. Which of the following may be adjudged as insolvent? (b) (a) Minor (b) Married woman (c) Firm (d) Lunatic 83. X and Y have joint account. A Garnishee order was served on X who does not have an individual account. Bank shall (c) (a) Attach the joint account (b) Attach 50% of the joint account like attachment (c) Not attach the joint account (d) All the above 84. Non-registered firm cannot (a) (a) Sue its partners or debtors (b) Be sued by its creditors (c) Be sued by its own partners (d) None of the above 85. Sets of Garnishee Order (d) (a) 3 (b) 5 (c) 4 (d) 2 86. Appropriation of accounts is provided in (b) (a) Negotiable Instruments (b) Banking Regulation Act, 1949 (c) Indian Contract Act, 1872 (d) All the above 87. A cheque becomes stale after (c) (a) 2 months (b) 3 months (c) 6 months (d) 12 months
Multiple Choice Question with Answers 321

88. Bank conducts Government business at its branches as an agent of (a) (a) RBI (b) SBI

(c) Government of India (d) None of the above 89. The validity period of a challan/bill passed by a Treasury Officer is for (b) (a) 7 days (b) 10 days (c) 14 days (d) 20 days 90. A draft for Rs. 18,000 is issued in which series? (c) (a) OT (b) TT (c) OL (d) OM 91. Minimum period for which a locker can be hired is (c) (a) 1 week (b) 3 months (c) 6 months (d) 12 months 92. When a fixed deposit receipt is kept with the bank for its safety, it is known as (a) (a) Safe custody (b) Safe deposit (c) Locker (d) Valid safe deposit 93. Rupee Traveller Cheques are for a period of (d) (a) 6 months (b) 12 months (c) 24 months (d) Unlimited 94. Indias 7th Export Processing Zone is being set up at (c) (a) Mumbai (b) Visakhapatnam (c) Cochin (d) Chennai 95. Gilt-edged securities are (b) (a) Shares of a private limited company (b) First-class Government securities (c) Shares of a company (d) None of the above 96. Certificate of Deposits can be issued for a minimum period of (b) (a) 45 days (b) 3 months (c) 6 months (d) 1 year 97. Telegraphic Transfer Receipt is a (c) (a) Bearer instrument (b) Order instrument (c) Non-negotiable (d) Business letter 98. A gift cheque is (c) (a) A negotiable instrument (b) An order instrument
322 Banking

(c) Simple receipt (d) A quasi-negotiable instrument 99. If a payee of a mail transfer does not maintain account (a) (a) Bankers cheque will be issued (b) M. T. will be credited to Sundry Deposit Account (c) Draft will be issued (d) New account will be opened 100. Which of the following can delegate his power to a third person? (c) (a) Liquidator (b) Executor (c) Individual (d) Partner 101. Overdue interest for all types of deposits can be paid in cash to (d) (a) Minor (b) Guardian (c) Depositor (d) Legal heirs of a deceased depositor 102. Which of the following has been withdrawn? (b)

(a) Credit Monitoring System (b) Credit Authorisation Scheme (c) Credit Monitoring Arrangement (d) None of the above 103. An executor of deceased account is appointed under (c) (a) Trust (b) Court (c) Will (d) Family tradition 104. Service area approach has been launched from (b) (a) January 1, 1990 (b) April 1, 1989 (c) April 1, 1992 (d) July 1, 1992 105. While granting an overdraft against the security of life insurance policy, the advance value is computed on the basis of (c) (a) Total amount of the policy (b) Paid-up value of the policy (c) Surrender value of the policy (d) None of the above 106. Book-debits of a company can be charged to the bank by way of (a) (a) Hypothecation (b) Pledge (c) Mortgage (d) Lien 107. Which of the following has issued Master shares? (c) (a) RBI (b) SBI (c) UTI (d) LIC
Multiple Choice Question with Answers 323

108. Which of the following schedules of Indian constitution deals with banking? (d) (a) 5th (b) 6th (c) 7th (d) 8th 109. Is there any limit for a currency transfer? (c) (a) 10 lakhs (b) 25 lakhs (c) No limit (d) 1 crore 110. Currency notes deposited in the currency chest are the property of (b) (a) Respective bank (b) RBI (c) SBI (d) Government of India 111. The minimum amount to effect a currency transfer is (c) (a) Rs. 500 (b) Rs. 2,000 (c) Rs. 1,000 withdrawal deposit Rs. 500 (d) Rs. 5,000 multiples of Rs. 1,000 112. Relationship between the RBI and the bank maintaining currency chest will be of (c) (a) Trustee and beneficiary (b) Principal and agent (c) Licensor and licensee (d) Creditor and debitor 113. Indian currency means (a) (a) One-rupee notes and coins under Indian Coinage Act, 1906 (b) Notes only (c) Coins only (d) None of the above 114. Which of the following notes cannot be exchanged? (b) (a) Solid notes (b) Mismatched notes (c) Mutilated notes (d) All the above 115. Daily operations on the currency chest are advised to (d) (a) RBI (b) Concerned bank (c) Main branch of the district (d) Through link branch to RBI 116. Suprious coins detected at the counter are sent to (a) (a) Mint (b) Government of India

(c) RBI (d) IBRD 117. Signature on Re. 1 note is made by the Finance Secretary but on the other notes by (c) (a) Prime Minister (b) President of India
324 Banking

(c) Governor of Reserve Bank of India (d) Finance Minister 118. On a cheque instead of two parallel lines only banks name is written. It is a (d) (a) General crossing (b) No crossing (c) Payable to bearer (d) Special crossing 119. A holder in due course of a cheque does not get protection from (b) (a) Irregularity of endorsement (b) Without consideration (c) Default in the title (d) All the above 120. What is the minimum period of reinvestment deposits? (d) (a) 1 month (b) 2 months (c) 3 months (d) 6 months 121. Which of the following is a borrowing facility/loan advance? (a) (a) Term finance (b) Performance guarantee (c) Bill received under letter of credit (d) All the above 122. Fixed assets ratio means (b) (a) Fixed assets to paid-up capital (b) Net fixed assets to long-term funds (c) Net worth (d) None of the above 123. A decline in the current ratio and liquidity ratio indicates (c) (a) Sound position (b) Solvency (c) Over trading (d) Off shore 124. Marginal cost means (a) (a) Raw-material selling expenses and other variable expenses (b) Prime cost (c) Margin of sales (d) None of the above 125. Assignment means transfer of (d) (a) Ownership only (b) Possession only (c) The policy-holder only (d) A debit/right/property only
Multiple Choice Question with Answers 325

126. Margin of surrender value for the purpose of bank loan is retained to the extent of (c) (a) 5% (b) 8% (c) 10% (d) 15% 127. Selective credit control covers (d) (a) Margin (b) Interest (c) Level of credit (d) All the above 128. Under which provisions is Selective credit control governed? (c) (a) Section 49 of the Banking Regulation Act (b) Section 3 of the Public Debt Act (c) Section 21 of the RBI Act

(d) Section 131 of the Negotiable Instrument Act 129. Pledge of advance is made against (b) (a) Gold (b) Commodities (c) Coins and notes (d) All the above 130. What rate of interest is charged on the advances made against Duty Draw Back Scheme? (d) (a) Same as of export advance (b) Same as on working capital (c) Same as of export refinance (d) Nil 131. Contract of insurance is a contract of (b) (a) Agency (b) Indemnity (c) Bailment (d) Guarantee 132. The insurance policy over the security is arranged for in the name of the (a) (a) Borrower and endorsed in favour of the bank (b) Bank (c) Borrower (d) None of the above 133. Bank becomes pledge over the (c) (a) Supply bills (b) Demand bills (c) Import bills (d) Export bills 134. Who registers the firm? (c) (a) Deputy Commissioner (b) Bank (c) Registrar of Firms (d) Registrar of Companies
326 Banking

135. Which of the following are covered under pledge? (d) (a) Actual delivery of the goods (b) Factory type pledge (c) Constructive delivery of the goods (d) All the above 136. Cash credit accounts are closed (b) (a) On the death of the agent (b) On the death of the principal (c) On the death of the Managing Director of the company (d) None of the above 137. Industrial co-operatives covered under SSI can raise loan without ceiling. The loan will be refinanced by (c) (a) IDBI (b) RBI (c) NABARD (d) DICGC 138. What is the minimum period of medium and long-term loans? (b) (a) 12 months (b) 18 months (c) 24 months (d) 36 months 139. Which bank does not belong to State Bank Group? (b) (a) State Bank of Indore (b) Banaras State Bank (c) State Bank of Bikaner and Jaipur (d) State Bank of Patiala 140. For which are the reserves maintained before issuing the following? (d) (a) One rupee notes (b) One rupee coins (c) All notes and coins (d) RBI notes 141. At the time of first nationalisation which bank had the highest deposits? (c) (a) Punjab National Bank (b) Canara Bank (c) Central Bank of India (d) Bank of India

142. New branch in rural and semi-urban area should cover an average population of over (a) (a) 13,000 (b) 17,000 (c) 20,000 (d) 25,000 143. The exchange rate is kept the same in all parts of the market by (c) (a) Speculation (b) Interest arbitrage (c) Exchange arbitrage (d) Hedging
Multiple Choice Question with Answers 327

144. If all the banks in an economy are nationalised and converted into a monopoly bank, total deposit creation (c) (a) Will increase (b) Will decrease (c) Will neither increase nor decrease (d) All the above 145. The purpose of international trade is (d) (a) Need for exports (b) To encourage exports (c) To promote international understanding (d) To increase income of participation countries 146. The power of banks to create credit depends on (a) (a) Amount of cash with them and the safe ratio (b) Safe ratio only (c) Amount of cash with them only (d) None of the above 147. The money the banker creates is (b) (a) His asset (b) His liability (c) Both his asset and liability (d) None of the above 148. High rate of investment may (b) (a) Reduce the amount of credit creation (b) Create better chances for the credit creation (c) Not affect the amount of credit in any way (d) Lead to any of the above-mentioned occurrences 149. The monetary base for credit expansion consists of (a) (a) The total value of high-powered money (b) The demand and time deposit liabilities (c) The size of the deficit in the governments budget (d) All of these 150. A rise in the reserve ratio of banks (c) (a) Will lead to an increase in the money supply (b) Will lead to a proportionate increase in the money (c) Will lead to a decrease in the money supply (d) None of these 151. The largest nationalised bank of India is (b) (a) Central Bank of India (b) State Bank of India (c) Bank of India (d) Reserve Bank of India
328 Banking

152. Commercial banks influence money supply through (d) (a) Printing of one rupee notes (b) Augmentation of savings and time deposits (c) Provision of high denomination notes (d) Creation of demand deposits

153. Which institution grants financial assistance exclusively to the private sector industries in our country? (c) (a) Unit Trust of India (b) Life Insurance Corporation of India (c) Industrial Credit and Investment Corporation of India (d) Industrial Finance Corporation of India 154. Who grants subsidy? (a) (a) Government of India (b) State Government (c) RBI (d) SBI 155. Minimum cash reserves fixed by law constitute (a) (a) A percentage of aggregate deposits of the bank (b) A percentage of aggregate loans and advances of the bank (c) A percentage of capital and reserves of the bank (d) None of the above statements is correct 156. The difference between the correct market value and the loan value of a given security in banking terms, is known as (c) (a) The collateral value (b) The security value differential (c) The margin (d) All the above 157. An increase in bank rate, other things being equal, will result into (b) (a) A decline in the cost of credit including greater and the demand for borrowing (b) An increase in the cost of credit discouraging demand for credit (c) No change in the cost of credit and the demand for borrowing (d) Cost of credit has no relationship with demand for borrowing 158. Inward remittances by foreign steamship and airlines companies to finance their operating expenses in the country are shown under (a) (a) The credit side of the current account of balance of payment (b) The debit side of the current account of balance of payment
Multiple Choice Question with Answers 329

(c) The credit side of the capital/account of balance of payment (d) The debit side of the capital account of balance of payment. 159. How many copies of banks lien are sent to the company? (b) (a) One (b) Two (c) Three (d) Four 160. Find out the correct statement (c) (a) Selective credit controls are superfluous in general monetary management (b) Selective credit controls have inverse relationship with quantitative instruments of credit control (c) Selective credit controls are complimentary to quantitative instruments of credit control (d) None of above statements is correct 161. Bank rate policy as a weapon of credit control has emerged from the Central Banks function as (b) (a) Bank of issue (b) Lender of the last resort (c) Bankers bank (d) All the above 162. Open market operations are mainly used as (b) (a) A fiscal device which assists Government borrowing (b) A monetary measure to regulate quantity of money in circulation and the cash reserves of the commercial banks (c) A measure to counteract extreme trends in business

(d) A measure to influence the balance of payments position 163. The variable reserve ratio has tremendous possibilities of effective credit control in (a) (a) Under-developed economies (b) Developed economies (c) Both developed and under-developed economies (d) Neither developed nor under-developed economies 164. Discount rate on certificate of deposits is decided by (d) (a) RBI (b) IBA (c) SBI (d) None of these 165. Sources to meet working capital are (d) (a) Net working capital or liquid surplus (b) Sundry creditors and advance payment received (c) Bank finance for working capital (d) All the above jointly
330 Banking

166. What is Debt Equity Ratio? (a) (a) Ratio of long-term borrowing to tangible net worth (b) Ratio of current assets to own tangible net worth (c) Ratio of fixed assets to tangible net worth (d) None of the above 167. Intangible assets are (d) (a) Preliminary expenses (b) Patents, copyright, goodwill (c) Losses which cannot be reduced from share capital (d) All the above 168. What is Current Ratio? (c) (a) Ratio of total assets to total liabilities (b) Earning capacity of unit (c) Ratio of current assets to current liabilities (d) None of the above 169. Current Ratio represents (a) (a) Ability of the unit to meet its current liabilities out of current assets (b) Ability of easy profit (c) Ability of the unit to pay instalments of term-loan (d) None of the above 170. Liability-side of the balance-sheet comprises (d) (a) Capital and reserve (b) Long-term liabilities (c) Current liabilities (d) All the above 171. The 15th day of a month is known as (a) (a) Customers Day (b) Complaints Day (c) Holiday (d) None of the above 172. Inter-bank participation certificates are issued on the recommendations of which committee? (b) (a) Ghosh (b) Vaghul (c) Chakravarthy (d) Narasimhan 173. A transferable letter of credit cannot be transferred more than (a) (a) Once (b) Twice (c) Three times (d) Four times
Multiple Choice Question with Answers 331

174. If the word irrevocable or revocable is not indicated in a letter of credit,

then the credit shall be deemed as (c) (a) Revolving credit (b) Standby credit (c) Revocable credit (d) Irrevocable credit 175. Service charges on Foreign Letter of Credit are fixed by (b) (a) IBA (b) FEDAI (c) RBI (d) IBRD 176. Exchange portion of Demand Bills purchased is credited to which account? (d) (a) Discount (b) Commission (c) Exchange (d) Interest 177. Unclaimed pass-books lying with the bank may be cancelled and destroyed after how many years? (b) (a) 2 (b) 3 (c) 5 (d) 10 178. The Government has allowed certain remission on which of the following bills? (a) (a) Usance (b) Demand (c) Exchange (d) All the above 179. Export Credit Packing Advances sanctioned to SSI exporters are covered under the credit guarantee scheme of (b) (a) DICGC (b) ECGC (c) DRI (d) None of the above 180. Total investment in a company is (b) (a) Net fixed assets (b) Shareholders funds plus term-liabilities (c) The total assets of the company (d) None of the above 181. The Deposit Insurance Credit Guarantee Scheme was formed on (c) (a) July 1, 1975 (b) January 1, 1952 (c) January 1, 1962 (d) January 1, 1991 182. At present (March 1998) the maximum banks deposit interest rate is (c) (a) 9% (b) 10% (c) 11% (d) 12%
332 Banking

183. Bankers cheque is valid from the issue date for (b) (a) 3 months (b) 6 months (c) 12 months (d) 24 months 184. Remittance means (d) (a) Despatch of issuable notes (b) Despatch of solid notes (c) Despatch of coins (d) All the above 185. For which of the following, minor is nor eligible for (d) (a) Making a will (b) Taking a locker in his name (c) Appointing nominee of a locker (d) All the above 186. A branch can be kept opened for Government business on a public holiday on the orders of the (a) (a) Collector (b) Branch Manager (c) Governor of the RBI (d) Prime Minister 187. Who pays commission to banks for conducting Government business? (c) (a) Government of India (b) State Government

(c) RBI (d) Central and State Governments 188. Which country has the lowest rate of interest on advances? (b) (a) India (b) Switzerland (c) Japan (d) USA 189. Concept of Banking Secrecy was converted into law in (d) (a) 1924 (b) 1927 (c) 1930 (d) 1934 190. The shares must be transferred in favour of the bank if the advance exceeds (c) (a) 1 lakh (b) 2 lakhs (c) 3 lakhs (d) 5 lakhs 191. Banks charge over boats is registered with (c) (a) RBI (b) SBI (c) Port authorities (d) Government of India 192. In April 2000 Indias trade deficit (exports and imports) was $ billion (b) (a) 220.4 (b) 112.3 (c) 467.8 (d) 100.5
Multiple Choice Question with Answers 333

193. With regard to the export policy of the Government of India, find out the correct statement (c) (a) All commodities can be exported without licence (b) Export licences are required for only a few items (c) Export licences are required for all items (d) All the above 194. We can open a savings bank account in the sole name of a minor if he completes age of (b) (a) 6 (b) 10 (c) 18 (d) 21 195. The Banking Regulations Act, 1949 was enacted to (c) (a) Nationalise the banks (b) Open regional rural banks (c) Consolidate and amend the laws relating to banking companies (d) Inviting foreign banks 196. The Banking Regulation Act was implemented on (c) (a) September 6, 1949 (b) April 1, 1949 (c) March 16, 1949 (d) March 31, 1949 197. The fourteen banks were nationalised on (a) (a) July 19, 1969 (b) June 1, 1969 (c) June 16, 1969 (d) July 1, 1969 198. The banks were nationalised with the motive to (d) (a) Develop the country economically (b) Give priority to neglected sectors and exports (c) Extend finances to weak and backward areas (d) All the above 199. The fourteen banks which were nationalised were having total deposits (c) (a) Rs. 10 crores or above (b) Rs. 25 crores or above (c) Rs. 50 crores or above (d) Rs. 75 crores or above 200. The remaining six banks were nationalised on (a) (a) April 15, 1980 (b) April 5, 1980 (c) April 1, 1980 (d) none of the above 201. The six more banks which were nationalised had demand deposits and

liabilities of (d) (a) Rs. 50 crores or above (b) Rs. 100 crores or above (c) Rs. 150 crores or above (d) Rs. 200 crores or above
334 Banking

202. The Lead Bank Scheme was introduced in (b) (a) 1968 (b) 1969 (c) 1974 (d) 1976 203. The Lead Bank Scheme was introduced on the basis of recommendations of (c) (a) Reserve Bank (b) NABARD (c) Study group appointed by National Credit Council under the chairmanship of Prof. D.R. Gadgil (d) None of the above 204. Under the Lead Bank Scheme all the districts in the country have been allocated amongst (c) (a) Land development banks (b) District co-operative banks (c) 22 public sector banks and three private sector banks (d) None of the above 205. The main functions of Lead Banks are (d) (a) Surveying the resources and potential for banking development in its district (b) Assisting the small units and small borrowers and other primary lending agencies (c) Maintaining contacts and liasion with government and semigovernment agencies (d) All the above 206. The Lead Bank in the district (d) (a) Does not have monopoly in the district (b) Identifies the underbanked areas for opening its branches in the district (c) Formulates the credit plans for all the banks in the district (d) All the above 207. The Lead Bank Scheme was launched towards the end of 1969 for the following objectives (d) (a) Extension of institutional finance facilities to neglected areas (b) Extension of credit to priority sector (c) Integration of various elements of development, namely, infrastructure extension and credit (d) All the above
Multiple Choice Question with Answers 335

208. The Service Area Approach is in force since (d) (a) 1975 (b) 1978 (c) 1985 (d) 1988 209. The Industrial Development Bank of India was set up in (a) (a) 1964 (b) 1969 (c) 1976 (d) 1981 210. Industrial Development Bank extends refinance for (b) (a) Small scale industrial units (b) Medium industrial units (c) Both the above (d) None of the above 211. Small Industries Development Bank, set up by an Act of parliament

commenced operating on (a) (a) January 1, 1990 (b) March 1, 1990 (c) April 1, 1990 (d) April 2, 1990 212. Small Industries Development Bank of India is wholly subsidiary of (d) (a) RBI (b) Exim Bank (c) NABARD (d) IDBI 213. Small Industries Development Bank of Indias Single Window scheme means that a borrower is granted (a) (a) Both term loan for fixed assets and loan for working capital through the same agency, namely, SFCs or Commercial Banks (b) Both term and working capital through SIDBI itself (c) Both term loan and working capital through IDBI (d) None of the above 214. National Equity Fund Scheme of SIDBI provides (c) (a) Equity type of support to small sector (b) Rehabilitation of viable sick units in the SSI sector (c) Both of the above (d) None of the above 215. The Industrial Finance Corporation of India was set up in (c) (a) March 1948 (b) April 1948 (c) July 1948 (d) October 1948 216. IFCI extends financial assistance for (d) (a) Setting new projects (b) Expansion of existing units (c) Diversification, renovation and modernisation of existing unit (d) All the above
336 Banking

217. The Industrial Finance Corporation of India provides loans to (c) (a) Industries in public sector only (b) Industries set up for export promotion (c) Joint-stock companies in the public or private or joint sector or co-operative sector (d) None of the above 218. Industrial Credit and Investment Corporation of India was set up in (d) (a) 1948 (b) 1950 (c) 1951 (d) 1955 219. The large part of the equity capital is held by (a) (a) Public sector institutions such as banks, LIC (b) World Bank (c) Reserve Bank (d) None of the above 220. ICICI provides financial assistance to (d) (a) Small-scale industries (b) Medium-scale industries (c) Large-scale industries (d) All the above 221. ICICI provides assistance by way of (d) (a) Long and medium-term loans and equity participation (b) Guaranteeing rupee and foreign currency loans raised from other sources (c) Underwriting issues of shares and debentures (d) All the above 222. The most significant feature of ICICIs operations is (d)

(a) The foreign currency loans sanctioned by it (b) To channelise World Bank funds to industry in India and to build capital market in India (c) The refinance facilities extended by it (d) Both (a) and (b) 223. The State Financial Corporations have been set up under (a) (a) State Financial Corporation Act, 1951 (b) Reserve Bank of India Act (c) Banking Regulation Act (d) Companies Act, 1956
Multiple Choice Question with Answers 337

224. State Financial Corporation extend financial assistance to (d) (a) Proprietory and partnership firms (b) Public and private limited companies and co-operative societies (c) Hindu undivided family concerns (d) All the above 225. The loans granted by SFCs are refinanced by (d) (a) IDBI (b) SIDBI (c) RBI (d) both (a) and (b) 226. NABARD provides refinance to (d) (a) Scheduled commercial banks (b) Co-operative banks (c) Regional rural banks (d) All the above 227. NABARD provides refinance assistance for (d) (a) Promotion of agriculture (b) Promotion of small scale industries (c) Cottage and village industries (d) All the above 228. The Export-Import Bank of India was set up in (c) (a) July 1969 (b) April 1970 (c) January 1982 (d) April 1982 229. Exim Bank also provides (d) (a) Refinance facilities (b) Consultancy and technology services (c) Services of finding foreign markets for exporters (d) All the above 230. Exim Bank concentrates on (a) (a) Medium-term financing (b) Short-term financing (c) Short and medium-term financing (d) Short and long-term financing 231. Exim Bank extends facility of (d) (a) Rediscounting of foreign bills of commercial banks (b) Advisory services to the exporters (c) Research and market surveys (d) All the above
338 Banking

232. The Regional Rural Banks were set up in (d) (a) January 1, 1975 (b) March 11, 1975 (c) April 1, 1975 (d) October 2, 1975 233. Regional Rural Banks were set up vide (d) (a) Reserve Bank of India Act

(b) Regional Rural Banks Act, 1976 (c) NABARD Act (d) None of the above 234. Regional Rural Banks carry on normal banking business as defined in (b) (a) Reserve Bank of India Act (b) Banking Regulation Act, 1949 (c) Regional Rural Bank Act, 1976 (d) Companies Act, 1956 235. Regional Rural Banks are classified under (d) (a) Land Developments Banks (b) Co-operative Banks (c) Commercial Banks (d) Public Sector Banks 236. The chairman of Regional Rural Bank is appointed by (d) (a) State Government (b) Reserve Bank of India (c) Central Government (d) Sponsoring bank in consultation with NABARD 237. The issued capital of the Regional Rural Banks was to be subscribed as under (d) (a) Fifty per cent by Central Government (b) Fifty per cent by State Government (c) Thirty per cent by sponsoring bank (d) All the above 238. Each Regional Rural Bank is managed by (a) (a) Board of Directors (b) Reserve Bank (c) Sponsoring commercial bank (d) None of the above 239. Regional Rural Banks have been permitted to pay % additional interest on (c) (a) All deposits accounts except current deposits (b) All deposits accounts including current deposits (c) Savings accounts and time deposits of less than three years (d) None of the above
Multiple Choice Question with Answers 339

240. Land mortgage banks are renamed since 1996-97 as (a) (a) Land Development Banks (b) Co-operative Central Banks (c) NABARD (d) Lead Bank 241. Co-operative banks are (a) (a) Private sector banks (b) Public sector banks (c) Joint-sector banks (d) None of the above 242. Certificate of Deposit can be issued by (d) (a) Reserve Bank, NABARD and Exim Bank only (b) Commercial banks and term lending institutions (c) Scheduled commercial banks excluding regional rural banks (d) All the above 243. The minimum acceptable amount under the Scheme of Certificate of Deposit is (d) (a) Rs. 5 lakhs (b) Rs. 10 lakhs (c) Rs. 20 lakhs (d) Rs. 25 lakhs 244. Banks are promised to grant loans against certificates of deposits (b) (a) Yes (b) No (c) Yes, only to NRI

(d) Yes, only up to 50% of the face value 245. Commercial paper may be issued for a period of (b) (a) 90 days (b) 91 to 180 days (c) 181 days to one year (d) One year or two years 246. The commercial paper can be issued to raise deposits by (a) (a) Commercial banks (b) Reserve Bank of India (c) IDBI (d) Every non-banking company 247. The aggregate amount of commercial paper issued by a bank should not exceed (c) (a) Rs. 25 crores (b) 5% of its demand and the liabilities (c) 75% of its fund based working capital limits (d) 1% of its net worth 248. The Stock Exchange Board of India was set up by a Special Act in (a) (a) 1988 (b) 1989 (c) 1987 (d) 1990
340 Banking

249. Discount and Finance House of India Limited was set up by RBI in (a) (a) 1988 (b) 1989 (c) 1987 (d) 1990 250. Demand deposits mean (a) (a) Deposits withdrawable on demand by the depositor (b) Current deposits (c) Fixed deposits (d) Short deposits 251. Time deposits means (a) (a) The deposits which are lent to bank for a fixed period (b) Time deposits include over due fixed deposits (c) Time deposits do not include recurring deposits as well (d) Time deposits do not include deposits under Home Loan Account Scheme 252. Fixed deposits are for the bank (c) (a) Demand liability (b) Fixed asset (c) Time liability (d) None of the above 253. Home Loan Account can be opened by any one in (d) (a) His own name (b) The name of the spouse (c) The name of the minor (d) All the above 254. The minimum amount of contribution to open a Home Loan Account (d) (a) Rs. 5 (b) Rs. 10 (c) Rs. 20 (d) Rs. 30 255. The Negotiable Instruments Act deals with (b) (a) Cheques, demand drafts, bankers cheques (b) Promissory notes, bills of exchange and cheques (c) Bills of exchange, cheques and demand drafts (d) Cheques, demand drafts and saving bank withdrawal forms 256. Which of the following are considered negotiable instruments per custom? (d) (a) Railway receipts (b) Demand drafts (c) None of the above (d) Both the above 257. The term escrow means (a) (a) Conditional delivery of an instrument (b) An inchoate instrument

(c) Kite flying (d) Window dressing

258. Hundies are (a) (a) Negotiable instruments by customs and usages (b) Negotiable instruments by definition (c) None of the above (d) Both the above 259. A person can not be called a holder of an instrument if he has obtained the instrument (d) (a) By unlawful means (b) For an illegal consideration (c) By fraud, coercion, duress or fear (d) All of these 260. The relationship between a banker and a customer is (c) (a) That of a debtor and a creditor (b) That of a creditor and a debtor (c) Primarily that of a debtor and a creditor (d) (a) and (b) together 261. To constitute a person as a customer (b) (a) There must be a single transaction of any nature (b) There must be some sort of an account (c) There must be frequency of transactions (d) There must be dealing of a banking nature 262. The banker has a lien on (a) (a) Bonds given for collection (b) Bonds given for safe custody (c) Bonds left by mistake (d) (a) and (b) together 263. The banker has a statutory obligation to (a) (a) Honour customers cheques (b) Exercise lien (c) Maintain secrecy of his customers accounts (d) Honour customers bills 264. In executing the standing instructions, there exists a relationship of (d) (a) Trustee and beneficiary (b) Debtor and creditor (c) Bailee and bailor (d) Agent and principal 265. The most undesirable customer is (d) (a) A minor (b) A married woman (c) An unregistered firm (d) An undischarged bankrupt
342 Banking

266. Contracts by lunatics in India (c) (a) Always valid (b) Always void (c) Always voidable (d) At times voidable 267. The best procedure for opening an account in the name of a minor x and the guardian y would be under the style (c) (a) x account (b) x account - minor (c) y in trust for x (d) y account 268. The balance of joint account in the name of x, y and z should be paid on the death of x (d) (a) To the legal representative of x (b) To y and z (c) To y or z

(d) To the legal representatives of x, y and z 269. A customers letter of instructions, without any stamp, in connection with the operations of his account is known as (a) (a) Mandate (b) Probate (c) Power of attorney (d) Authority letter 270. The most important feature of negotiable instrument is (d) (a) Free transfer (b) Transfer free from defects (c) Right to issue (d) (a) and (b) together 271. The document drawn by a debtor on the creditor agreeing to pay a certain sum is called (a) (a) Promissory note (b) Cheque (c) Bill of exchange (d) Draft 272. The following one is a negotiable instrument, negotiable by usage or custom (b) (a) Bill of exchange (b) Share warrant (c) Accommodation bill (d) Promissory note 273. In the case of negotiable instrument, the following person generally gets a good title (c) (a) Finder of the lost instrument (b) Holder of a stolen instrument (c) Holder-in-due course (d) Holder of a forged instrument 274. A cheque which is not crossed is called (a) (a) Open cheque (b) Bearer cheque (c) Uncrossed cheque (d) Order cheque
Multiple Choice Question with Answers 343

275. The safest form of crossing is (a) (a) Account payee crossing (b) General crossing (c) Special crossing (d) Double crossing 276. The following one is absolutely essential for a special crossing (d) (a) Two parallel transverse lines (b) Words And company (c) Words Not negotiable (d) Name of a banker 277. Not negotiable crossing is a warning to the (c) (a) Paying banker (b) Collecting banker (c) Holder (d) (a) and (b) together 278. A not negotiable crossing restricts what of the cheque (b) (a) Transferability (b) Negotiability (c) Neither transferability nor negotiability (d) Both transferability and negotiability 279. An order cheque can be converted into a bearer cheque by means of (c) (a) Sans recourse endorsement (b) Special endorsement (c) Blank endorsement (d) Sans frais endorsement 280. Endorsement signifies that the (d) (a) Endorser has got a good title (b) Endorsers signature is genuine (c) Previous endorsements are genuine (d) All the above 281. One of the following endorsements is not a valid one (c) (a) Conditional endorsement (b) Restrictive endorsement (c) Partial endorsement (d) Facultative endorsement 282. Negotiability gives to the transferee what title of the transferor (a) (a) Better title (b) No title

(c) The same title (d) No better title 283. To get statutory protection, the paying banker must make (c) (a) Payment to a holder (b) Payment in due course (c) Payment to a holder in due course (d) Payment to a drawee in case of need
344 Banking

284. The best answer for returning a cheque for want of funds in the account is (d) (a) Refer to drawer (b) Not provided for (c) Exceeds arrangement (d) Not sufficient funds 285. When the amount stated in words and figures differs, the banker (b) (a) Can honour the amount in figures (b) Can honour the amount in words (c) Can honour the smaller amount (d) Can dishonour it 286. When a Garnishee order is issued by the court attaching the account of a customer, the banker is called (a) (a) Garnishee (b) Garnishor (c) Judgement creditor (d) Judgement debtor 287. A collecting banker is given protection only when he collects (a) (a) A crossed cheque (b) An order cheque (c) A bearer cheque (d) A mutilated cheque 288. A collecting banker is given the statutory protection only when he acts as (a) (a) An agent (b) A holder (c) A holder for value (d) A holder in due course 289. Collecting a cheque payable to the firm to the private account of a partner without enquiry constitutes (d) (a) Gross negligence (b) Contributory negligence (c) Negligence under remote grounds (d) Negligence connected with immediate collection of a cheque 290. Bankers undertake the duty of collection of cheques and bills because (d) (a) Section 131 of the Negotiable Instruments Act compels them to do so (b) Section 85 of the Negotiable Instruments Act compels them to do so (c) Collection is a must for a crossed cheque (d) They want to do it as a service 291. The most risky charge from a bankers point of view is (b) (a) Pledge (b) Hypothecation (c) Mortgage (d) Lien 292. The most convenient charge from an industrialists point of view is (c) (a) Equitable mortgage (b) Legal mortgage (c) Hypothecation (d) Lien
Multiple Choice Question with Answers 345

293. An equitable mortgage can be created in respect of (b) (a) Government securities (b) Real estate (c) Wheat in a godown (d) Life policies 294. A charge where there is neither the transfer of ownership nor the possession is called (a) (a) Hypothecation (b) Lien (c) Pledge (d) Mortgage 295. The liability of the mortgager is gradually reduced in the case of (c)

(a) Equitable mortgage (b) Legal mortgage (c) Usufructuary mortgage (d) Conditional mortgage 296. Real estate is not popular as a security because of (a) (a) Difficulties in ascertaining the title (b) Difficulties in its valuation (c) The absence of ready market (d) Long-term nature of the loan