Jaiib Caiib Exams LEGAL ASPECTS OF BANKING

jaiib caiib exams
LEGAL ASPECTS OF BANKING ▼
LEGAL ASPECTS OF BANKING
01. A Blue Chip means

a) Excellent Management Pr ofessional
b) Shares of good Companies
c) Reinforced Concrete
d) Blue Colour ed Precious Stones
02. A Bridge finance is extended for o vercoming

a) Delay in getting of the public issue
b) Delay in disbursement of term loan
c) Delay in disbursement of working capit al for completing the documentation
d) For A & B
e) A, B & C
03. As per SEBI guidelines , any entity /person engaged in the mark eting and sellin g of mutual funds
products is required to pass a cer tification test and obtain a r egistration number fr om case of
a) SEBI (Securities and Ex change Boar d of India)
b) AMFI (Association of Mutual F unds in India )
c) NSE (National St ock Exchange)
d) A, B & C
04. Interest charged in advance accounts a s per RBI dir ective can not be subject t o scrutiny b y court.
This is provided in
a) Section 35A of BR Act
b) Section 21(A) of BR Act
c) Of BR Act
d) Section 26 of RBI Act
05. A floating char ge means

a) Charge at the time or befor e the company is floated
b) Charge on all floating assets of the com pany
c) An equitable char ge on all assets of the company
d) Any of the abo ve.
06. The charge by way of lien over goods belonging t o a company must be r egistered with Registr ar of
Companies within a period of
a) 30 days of creation of law
b) This charge need not be r egistered as this is not hypothecation, mor tgage etc
c) 30 days of default in r epayment
d) A or C whiche ver is earlier
07. Hypothecation is defined in
a) Hypothecation Act
b) Indian Contr act Act
c) Transfer of Property Act
d) SARFAESI Act
08. The State Go vt. wants to seize the good s pledged t o bank as the borr ower has defaulted in
payment of tax. In this case,
a) Govt dues enjo ys priority o ver bank dues
b) Bank dues enjo ys priority o ver Government dues
c) Both enjoys equal priority
d) The Government cannot seiz e the goods.
09. The auctionable claim is assigned in favour of more than one assignee at different points of time.
The priority of char ge is determined wit h reference to date of
a) Execution of notice of assignment

b) Execution of the written instrument for assignment
c) Receipt of notice of assignment
d) NoA
10. A Mortgage cannot be enfor ced in the a bsence of
a) Delivery of the title deeds

b) Legal Opinion
c) Narration in Title deeds r egister
d) Pecuniary obligation.
11. A simple mor tgage need be r egistered when

a) The Loan amount ex ceed Rs.100/-
b) Value of mor tgaged property exceeds Rs.100/-
c) A or B whiche ver exceeds Rs.100/-
d) Both A & B
12. A Mortgage of the mor tgaged property is called

a) Sub-mor tgage
b) Second Mor tgage
c) Re-mortgage
d) Fraudulent Mor tgage
13. For determining the adv ance amount th e shares will be v alued on the basis of
a) Current market price
b) Average market price for the last 12 months
c) Face Value
d) A or B whiche ver is lower.
14. Assignment of LIC policy is done as per section…… of ……. Act.
a) 132 of Transfer of Property Act
b) 38, Indian Insur ance Act 1938
c) 138 of Contr act Act
d) NOA
15. Government Pr omissory notes should be sent t o public debt office t o confirm genuiness of
a) The Promissory note
b) Endorsement
c) Alternations, if any
d) All the abo ve.
16. Gold Loans ar e given only to properly introduced persons because of
a) RBI’s directives
b) Bank will lose the right t o sell the gold if the pledgee ’s title is def ective
c) Sec.131 of Negotiable Instrument Act
d) All the abo ve.
17. Reserve created out of pr ofit from business oper ation is known as
a) Capital Reser ve b) Profit Reser ve
c) Revenue Reser ve d) Free Reserve
18. The following is a T erm Liability

a) Debentures payable within a y ear from the date of Balance Sheet
b) Preference Shares payable within a period of one y ear from the date of Balanc e Sheet
c) Term Loan instalments pa yable in a year
d) Deposit from public pa yable in 2 years time.
19. Investment in Shar es of other companies can be classified as Curr ent Asset only when the
shares are
a) Quoted
b) Relate to trade investment
c) A &B
d) Shares cannot be classified as Curr ent Assets
20. The following is not usually classified as Other Non Curr ent Assets
a) Advance given to Directors
b) Tender Deposit
c) Receivable outstanding be yond 12 mon ths
d) Preliminary and Pre operative expenses
21. A unit is showing a net pr ofit of Rs.46,000/-. Dividend received Rs.8000/-. Operating
expenses is Rs.96000/-. Find the gross profit
a) 134000 b) 150000 c) 142000
22. A firm paid Rs.16 lacs for pur chase of a business with machiner y worth Rs.10 lacs and
other assets wor th Rs.4 lacs. In this case the diff erence of Rs.2 lacs is tr eated as
a) P&L Loss on pur chase of asset
b) Goodwill Intangible Asset
c) Fixed Asset b y inflating the v alue of fixed asset
d) Current Asset b y inflating the v alue of curr ent asset
23. If a sum of Rs10,000/accumulates to Rs16,000/after 3 years at simple Interest , what is the rate of
Interest.
a) 16%
b) 25%
c) 23%
d) 20%
24. The Net Working Capital r efers to

a) Liquid surplus
b) Borrowers Contributions fr om long term sour ce to short term use
c) Excess Current Asset o ver Current Liability
d) All the abo ve.
25. The duration of an oper ating cycle in 30 days. The operating cycle in this case r epeats……. times a
year
a) 30 times
b) 12 times
c) 10 times
d) 52 times
26. The following is not a char geable curr ent assets
a) Book debt
b) Spares
c) Work in process
d) Construction work in pr ogress
27. As per RBI guidelines, a bank is r equired to assess the working capital on the basis of the following
method
a) Turnover Method
b) Cash Budget Method
c) MPBF of Tandon Method
d) Any Method as decided b y the individual banks
28. As per the Second method of lending the borr owers contribution fr om long term sour ce
a) is minimum 25% of t otal current assets
b) is restricted to 25% of working capital g ap
c) is 25% of other curr ent liabilities
d) any amount which the unit can bring
29. Total Current Asset of a unit is Rs.300 lacs. Other Current Liabilities is Rs.200 lacs. The MPBF as
per Ist Method & 2 nd method can be
a) 75 and 25 lacs
b) 25 lacs and 75 lacs
c) Rs.100 lacs & Rs.150 lacs
d) Rs.20 lacs & Rs.80 lacs
30. A borrower need not bring any matching contribution fr om long term sour ces in respect of
a) Export Receivables
b) Finished goods pr oduced for a specific expor t order
c) Adhoc limits
d) A & B
31 A Company mak es a single pr oduct with a sales price of Rs.10/- and a mar ginal cost of
Rs.6/-. Fixed Cost are Rs.60000/- p.a. In this case,
Number of units at br eak even
a) 15000
b) 10000
c) 6000
d) none of the abo ve.
32. In the above problem, Profit Volume Ratio

a) 30%
b) 40%
c) 50%
d) 60%
33. The long term use is 120% of long term sour ce. This indicates the unit has
a) CR 1.2
b) Negative TNW
c) Low Capital
d) Negative NWC
34. Tangible Networ th is computed b y

a) Total Tangible Asset less outside liabilities
b) Capital, free reserves & surplus less Int angible Asset
c) Networth less Intangible Asset
d) All the abo ve.
35. A company has a networth of Rs.5 lacs. Term liability Rs.10 lacs, Fixed Asset of Rs.16 lacs and
Current Asset Rs.25 lacs. There is no intangible asset or ONCA. It's net working capital is
a) Rs. 10 lakhs
b) Rs. 1 lakh
c) Rs. 9 lakh
d) Rs. (-) 1 lakh
36. Financial le verage means

a) use leveraged lease t o plan tax liability
b) High degree of solvency
c) Law bank finance
d) Use of mor e debt capital t o increase profit.
37. Diversion means

a) Diversifying to activities not r elated to main business
b) Retrenching emplo yees
c) Use of Curr ent Assets for pa yment of Term Liability
d) Use of Curr ent Liabilities for long term use
Examine the following balance sheet t o answer the question ther eafter:
Liability Asset
Equity Capital 200 Gross Block 1000

Less: Dep 200
-------
Preference Share Capital 100 Net Block 800
Term loan 600 Inventory 300
Bank Overdraft 400 Investment in Go vt. security 50
Sundry Creditors 100 Preliminary expenses 100
------- Receivables 150
-------
1400 1400
38. Capital Gearing Ratio

a) 0.78
b) 1.20
c) 0.67
d) 0.87
39. Debt Equity Ratio is
a) 2:1
b) 3:1
c) 4:1
d) 1:1
40. Total Outside Liability/TNW

a) 3.67:1
b) 5.50:1
c) 12 : 1
d) 6 : 1
41. Net working capital

a) 100
b) NIL
c) 200
d) Cannot be calculated
42. Quick Ratio

a) 0.4:1
b) 2.1:1
c) 1.5:1
d) 1:1
43. Total Tangible Asset

a) 1400
b) 1300
c) 1500
d) 1600
44. Opening stock of raw material is Rs.30 lacs, closing stock is Rs.50 lacs. Annual purchase is
Rs.500 lacs. What is the a verage period of holding o f Raw Materials?
a) 2 M
b) 1.5 M
c) 1 M
d) NOA
45. Holding period of Receiv ables is calcul ated with reference to
a) Cost of Sales
b) Cost of Production
c) Gross Sales
d) NOA.
46. Creditors Velocity expr esses the

a) Maximum period for which cr edit is given
b) Average period of cr edit enjoyed
c) Minimum period of cr edit given
d) Minimum period for which cr edit enjoyed.
47. The following is a “Means of Finance ” for the cost of pr oject
a) Leasing
b) Subsidy
c) Deferred Credit from Suppliers
d) All the abo ve.
48. For a large and medium units DSCR sho uld be
a) Maximum 2:1 (b) Maximum 1.5:1
c) Minimum 2:1 (d) Minimum 1.5:1
49. Variable Cost and Sale Price r emaining the same, a rise in fix ed cost result in
a) High BEP ( High Br eak even point)
b) Low BEP
c) High Margin of Safety
d) B&C
50. What is the formula for char ging comp ound interest with Annual Compounding.
a) I = Pnr
b) P+I
c) A = P( 1+r)n
d) Any of the 3
51. What is the minimum period t o be allowed t o drawee to decide on acceptance / rejections of
a usance bill
a) 2 Days
b) 48 Hours
c) 48 Hrs including public holida ys
d) 48 hrs excluding public holida ys
52. Ramesh deposited Rs 10,000/ for 3 years . The Interest is compounded annually at 10% . What will
be the amount r eceivable by Ramesh at the end of 3 y ear period.
a) 13,310
b) 13,000
c) 12,000
d) 13,300
53. While calculating the v alue of (1+.10)3 (to the power of 3) the same can be calculated
a) manually
b) using calculat or
c) using MS Ex cel
d) all the above
54. Annuities ar e
a) The annual inter est payable or receivable in a debt or an inv estment.
b) Lumpsum pa yment made any time during the course of a fix ed period of time.
c) The total amount pa yable annually in respect of a debt or investment
d) Series of payments (many number of cash flows) made at a specified frequency over the
course of a fix ed period of time
55. An Annuity is an or dinary Annuity if,

a) Payments are required to be made at the beginnin g of each period.
b) Payments are required to be made at the middle of each period
c) Payments are required to be made at or dinary installments
d) Payments are required to be made at the end of each period.
56. The Marine Insur ance Policy should be expr essed in

a) Rupees
b) US Dollars
c) Same Currency in which the L C is drawn
d) Any foreign currency.
57. The discount r ate which equals the pr esent value of promised flow t o the current market
price /purchase price. This is known as
a) Yield to maturity
b) NPV
c) IRR
d) Treasury bills
58. The value which the bond holder gets o n maturity is called
a) Maturity value
b) NAV
c) the redemption v alue
d) IRR
59. This is the amount b y which an asset is expected t o lose its v alue. What is this
a) Market value
b) Wear and tear
c) Depreciation
d) NAP
60. EEFC can be opened in

a) Rupees
b) Any one of the four designated curr encies
c) One of the permitted curr encies
d) AMUS
61. A method of calculating depreciation of an asset , which assumes that the asset will lose an equal
amount of v alue each y ear is known as
a) Salvage value
b) Depreciation
c) Straight line Method of calculation
d) Accumulated Depr eciation
62. A credit facility will be classified as NP A if……… remains past due for one quar ter
a) Interest
b) Instalment
c) A or B
d) A & B
63. As per Prudential Accounting Norms pr escribed b y RBI, assets ar e classified int o …… type
a) 3
b) 8
c) 4
d) 5
64. The home curr ency price of one unit of a foreign currency is quoted eg USD 1 = Rs43.20
a) Indirect quotation
b) Exchange rate
c) Rate of USD
d) Direct quotation
65. If the rate of a currency A is known in terms of currency B and rate of Currency B in terms of
Currency C , we can derive the rate of currency A interms of Currency C using the technique of cross
currency.
a) Exchange rate
b) Cross rate
c) Forward rate
d) None of the abo ve
66. As per NABARD guidelines the minimum Internal Rate of Return for Agricultur al Project is
a) 15%
b) 25%
c) 30%
d) 18%
67. In case of Dir ect quotation if the forward rate is more than spot rate the base currency is called as
being at -----
a) Discount
b) Forward rate
c) Spot rate
d) Premium
68. An operation by which one can make risk free profits making use of the interest differentials
between two places is called.

a) Open mark et operation
b) Profitability
c) Free market
d) Arbitrage
69. If the forward rate is less than the spot rate the base curr ency is said t o be at
a) Discount
b) Premium
c) At par
d) None of the abo ve.
70. The amount which the owner of the business has invested in the firm and can claim from the firm
is known as ------
a) Capital
b) Loan
c) Term Loan
d) Fixed Asset.
71. The amount which the firm owe t o outsiders

a) Assets
b) Capital
c) Liabilities
d) Intangible assets
72. A person who owes mone y to a firm , mo stly on account of cr edit sales of goods is called.
a) Creditor
b) Debtor
c) Borrower
d) lender
73. The balance sheet represents an expansion of the equation as Assets = Liabilities +Capital This
statement is
a) Cannot be r elied
b) false
c) Not acceptable
d) True
74. Assets minus original capital = Liability

a) True b) False
c) can be accepted d) None of the abo ve.
75. If a firm borr ows mone y its capital would be reduced
a) This statement is false
b) This statement is true
c) The same is acceptable
76. ---------- is the value of an established business over and above the value represented by it’s tangible
assets .
a) Assets
b) Liabilities
c) Goodwill
77. If the partnership does not mention any method of maintaining capital account then ------- method
of capital has t o be used.
a) Fluctuating capital account
b) Partners Current account
c) Capital account
d) Fixed capital account
78. The joining of a new person int o the existing par tnership as a par tner is called
a) Retirement of a par tner
b) Resolution of a par tnership
c) Good will
d) Admission of a par tner
79. Under the -------- capital method two accounts are maintained for each partner viz current account
and capital account.
a) Fixed Capital Method
b) Fluctuating capital method
c) Equity capital Method
d) Preference share capital
80. As per new guidelines both SLR and non SLR securities ar e to be classified int o
a) Held to maturity.
b) Available for sale
c) Held for trading
d) All the abo ve .
81. Amount of Investment under Securities held to maturity should not exceed --------- of Bank’s total
investment
a) Twenty percentage of the Bank’ s total investment (20% of total investment)
b) Twenty five percentage of the Bank’ s total investment (25% of total investment)
c) forty nine percentage of the Bank’ s total investment (49% of total investment)
d) forty percentage of the Bank’ s total investment (40 % of total investment)
82. The form of Balance sheet and Profit and loss account of a Banking Company is prescribed in
forms A and B of -------------- schedule of the Banking Regulation Act 1949.
a) Second
b) Third
c) First
d) Fourth
83. The Companies Act pr ohibits issue of any pr eference share that is -----------
a) cumulative
b) redeemable
c) both a and b
d) Irredeemable
84. The capital which is stated in the Memor andum of Association is known as
a) Memorandum Capital
b) Paid up capital
c) Authorised capital
d) Issued capital
85. Authorised capital is also known as

a) Nominal or Register ed Capital
b) Equity capital
c) Preference share capital
d) All the abo ve
86. When shar es are issued at higher than the face v alue of the shar es they are said to be issued at a
a) Discount - b) Par- c) Premium
e) None of the abo ve
87. Issue of shar es at a discount should be authorized by the members b y passing a resolution
in the gener al meeting and r esolution of members should specify the r ate of discount
which should not ex ceed 10% of the face v alue of the shar es Further this is subject t o
a) Obtention of sanction fr om Company Law Boar d
b) These shar es must be issued with in 2 months
c) Both (a) and (b)
88. According to section 79A inser ted by Companies Amendment Act 1999 --------- shar es
means equity shar es issued b y the com pany to employees or directors at a dis count or
for consider ation other than cash for pr oviding know how or making a vailable right in the
intellectual pr operty rights or v alue addition, by whatever name called.
a) Employees stock option
b) Equity shares
c) Sweat equity
89. A scheme under which the company gr ants option (A right but not an obligation ) t o an
employee to apply for shar es of the com pany at a pr e determined price is known as
a) Employees Stock Option Scheme (ESOS)
b) Equity shares
c) Sweat Equity
90. The formation of a company is go verned by the rules and r egulations as contained in
a) Indian Companies Act
b) RBI act
c) BR Act
91. Profit and Loss Account is one of the Final Accounts pr epared by a Company. What is the
other one.
a) Schedules t o P&L accounts
b) Balance sheet
c) Trading Account
92. Liabilities that will arise on the happening of cer tain event
a) Current liabilities
b) Term Liabilities
c) Contingent Liabilities
93. Schedule VI of the Companies Act pr escribes the form of

a) Balance sheet
b) Trading Account
c) Balance sheet
94. A computer Accounting system runs based on a set of instructions called the softwar e
programmes de veloped by a person wh o is a computer softwar e professional and he is
called -------
a) Programmer
b) Software Engineer
c) IT man
95. Accounting softwar e may be written in any one of the computer languages such as
a) Windows, UNIX etc
b) JAVA C+ etc
c) COBOL, Foxpro etc
96. Computers ar e basically classified int o

a) Analogue Computers and Digital computers
b) Hardware and softwar e
c) Wipro and Infosysis
d) All the abo ve
97. A Customer Ser vice Meet should be or ganized at every Branch
a) Once in a F ortnight
b) Once in a Quar ter
c) Once in a Month
d) Once in a Half-Y ear
98. Who cannot file a complaint under Consumer Pr otection Act?

a) Banks
b) State Government
c) Public Inter est Litigation Gr oup
d) Persons receiving ser vices free of charge
99. Banking Ombudsman is appointed b y

a) Central Government / Ministr y of Finan ce
b) State Government
c) IDBI
d) RBI
100. DRT has jurisdiction r elating to cases pertaining to Banks, Financial Institution s with debt
amount of
a) Rs. 1 lakh and abo ve
b) Rs. 5 lakh and abo ve
c) Rs. 10 lakh and abo ve
d) Rs. 20 lakh and abo ve
ANSWERS
1) b 2) d 3) b 4) b 5) c 6) b
7) d 8) b 9) b 10) d 11) a 12) a
13) d 14) b 15) d 16) b 17) c 18) d
19) c 20) d 21) a 22) b 23) d 24) d
25) b 26) d 27) d 28) a 29) a 30) a
31) a 32) b 33) d 34) d 35) d 36) d
37) d 38) a 39) b 40) b 41) b 42) a
43) b 44) c 45) c 46) b 47) d 48) c
49) a 50) c 51) d 52) a 53) b 54) d
55) d 56) c 57) a 58) c 59) c 60) c
61) c 62) c 63) c 64) d 65) b 66) a
67) d 68) d 69) a 70) a 71) c 72) b
73) d 74) b 75) a 76) c 77) d 78) d
79) a 80) d 81) b 82) b 83) d 84) c
85) a 86) c 87) c 88) c 89) a 90) a
91) b 92) c 93) a 94) a 95) c 96) a
97) d 98) d 99) d 100) c

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LEGAL ASPECTS OF BANKING ▼

LEGAL ASPECTS OF BANKING

01. A Blue Chip means

02. A Bridge ﬁnance is extended for o vercoming

05. A ﬂoating char ge means

a) Execution of notice of assignment

10. A Mortgage cannot be enfor ced in the a bsence of

a) Delivery of the title deeds

11. A simple mor tgage need be r egistered when

12. A Mortgage of the mor tgaged property is called

18. The following is a T erm Liability

24. The Net Working Capital r efers to

32. In the above problem, Proﬁt Volume Ratio

34. Tangible Networ th is computed b y

36. Financial le verage means

37. Diversion means

Equity Capital 200 Gross Block 1000

38. Capital Gearing Ratio

40. Total Outside Liability/TNW

41. Net working capital

42. Quick Ratio

43. Total Tangible Asset

46. Creditors Velocity expr esses the

56. The Marine Insur ance Policy should be expr essed in

60. EEFC can be opened in

71. The amount which the ﬁrm owe t o outsiders

74. Assets minus original capital = Liability

85. Authorised capital is also known as

93. Schedule VI of the Companies Act pr escribes the form of

96. Computers ar e basically classiﬁed int o

98. Who cannot ﬁle a complaint under Consumer Pr otection Act?

99. Banking Ombudsman is appointed b y

7) d 8) b 9) b 10) d 11) a 12) a

97) d 98) d 99) d 100) c

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