1. Which one of the following is not a stake holder in bank’s business?

a. Share holders b. Depositors

c. Reserve Bank of India d. Employees

2. Chief Financial Officer in a bank works mainly from:

a. Head office b. Zonal office

c. Every branch d. All of the above

3. One of the following is a pure non-credit service. Identify it?

a. Guarantees b. Safe deposit locker facility

c. Letter of credit facility d. Acceptance facility

Key to check your progress

1.c 2. 3.b

1.1.10 Terminal questions

 What are the elements of financial planning?

Discuss the concept of risk return trade off

Discuss the factors responsible for profitability of banks

1. Which of the following statements is correct?

a. CP is a product which is issued by a b. CP is a product which is issued by a

bank corporate
c. CP is issued by Government of India d. CP is a product which is issued by
RBI

2. In call money market which of the following organisations are permitted to undertake both
borrowing and lending?

a. Companies b. Development financial institutions

like SIDBI, NABARD

c. Only banks d. Banks and Primary dealers

3. In the case of bonds, an increase in the market interest rate

a. will result in a decline in the price b. will result in an increase in the price

c. will not result in a change in the d. will depend on the issuer

price

Key to check your progress

1.b 2.d 3.a

1.2.19 Terminal questions

What is meant by CBLO?

 Outline the differences between the Certificate of Deposit and
Commercial Paper
1. RBI pays interest at bank rate on

a. CRR balances exceeding 3 % of b. Full amount of SLR balances

NDTL

c. CRR balances exceeding the d. No interest is payable on CRR

maximum of 10% of NDTL balances

2. Which one of the following investments is not considered as SLR investments?

a. Cash deposits in excess of CRR b. Investment in corporate bonds

c. Investment in Central govt. d. Investment in state govt. securities

Securities

Key to check your progress

1.d 2.b

1.3.9 Terminal questions

 Why is liquidity management important?

What are the tools for ensuring liquidity? How

are CRR and SLR computed?

Briefly explain CRR and SLR.
1. Banks are mandated to invest in which of the following?

a. Govt. Securities b. Equity shares of other PSU banks

c. Debentures issued by big companies d CDs.

 2. For the purpose of balance sheet disclosure all investments are categorised into ------
categories.

a. 3 b. 4

c. 5 d6

3. When grouping of investments into two categories is required to be

done by a cooperative bank?

a. At the time of the purchase 3 b. At the beginning of the year d

c. Only at beginning of half year At any time depending on the

requirement of the bank

Key to check your progress

1.a 2.c 3.b

1.4.17 Terminal questions

 Discuss the importance of SLR reserve requirement in managing the
Money supply in the market.
In what ways the classification of assets addresses the issue of capital
provisions by banks?

1. A bank is holding an investment whose rating has undergone a downgrading. What is the

type of risk the bank faced?

a. Market risk b. Credit risk

c. Capital risk d. Operational risk

2. A transaction where financial securities are issued against a pool of assets

i
s
called__________

a. Credit swap b. Credit security

c. Securitisation d. None of the above

3. Operational risk is faced by banks when

a. A borrower does not repay the b. A borrower does not repay the
interest in time instalment in time
c. There is increase in interest rates in d. Malfunction of the computer system
the market. resulting in loss

4. Interest rate risk is not faced by banks if they lend

a. Completely on floating rate basis b. Completely on fixed rate basis

c. To government by buying securities d. None of the above

5. Which of the following is not a part of the risk management process?

a. Undertaking various banking activities
b. Measurement
d. Monitoring
c. Management

Answers:

1. a 2. c 3. D 4. a 5. a
 2.1.13 Reference
1. The number of time buckets as per RBI in study of liquidity statement is

a. 6 b. 8

c. 10 d. 9

2. Dynamic liquidity statement is required to be submitted to RBI

a. Monthly b. Quarterly

c. Half yearly d. Fortnightly

3. Under interest rate risk management studies positive gap means

a. Rate sensitive assets are more than b. Rate sensitive assets are less than
rate sensitive liabilities rate sensitive liabilities

c. Situation where gap results in d. None of the above

profits

Answers to check your progress

1.c 2.d 3.a

2.2.12 Terminal questions

What are the effects of interest rate risk on the ALM?

 Explain the broad categories of interest rate risk.
1. Risk weight for a state government guaranteed advance is

a. 20 % b. 0 %

c. 50% d. Depending on the rating of the

borrower

2. A Subordinate debt will be considered as Tier II capital provided its term is not less than

a. One year b. Two years

c. Three years d. Five years

3. The value of a subordinate debt with unexpired tenure of three years will be discounted
by----% to be considered for tier II capital.

a. 20 b. 30

c. 40 d. 60

Key to check your progress

1.d 2.a 3.c

2.3.9 Terminal questions

List out the three pillars of Basel II accord

Write short note on regulatory capital

1. Which of the following statements is correct?

a. forward contracts are exchange b. Futures are exchange traded

traded contracts contracts

c. Forwards cannot be for any amount d. Futures can be settled at any date of
choice of the concerned parties

2. Which of the following statements is correct?

a. Call option gives the purchaser a b. Put option gives a right to the
right to sell purchaser to sell

c. Options are dealt through only d. Forwards are traded through

exchanges exchanges

3. One of the following types of transactions is not Swap. Identify?

a. currency b. interest

c. basis d. tenure
Answers to check your progress

1.b 2.b 3.d

2.4.8 Terminal questions

What are the different types of Options available and if you want to buy
which one you would choose?
What are the different types of Swaps that a bank can enter into?
1. Rewards of proper management of Operational risks are

a. Lesser risk capital b. Cost reduction in operations

c. Competitive edge d. All of the above

Which one of the above is correct?

2. For which of the following reasons strong MIS is required for Operational risk management

a. Reporting, monitoring and b. Assessing historical losses and

controlling risk identifying areas for strengthening
the procedures

c. MIS gives important aspects of d. MIS is RBI mandated data

business

Key to check your progress

1.a 2.b

2.5.10 Terminal questions

What are the different approaches suggested by Basel II accord in

respect of Operational Risk Management?
List out the eight business lines suggested in standardised approach.
1. Bank’s exposure to a group of borrowers permissible in the normal
course is ____% of capital funds

a.15 b.20

c.40 d. No ceiling
 2. The exposure ceiling permissible in the normal course in case of a single borrower who is
engaged in infrastructure activity is

a. 20 b. 25

c.40 d. 50

3. Which one of the following statements is correct?

a. Banks can lend against shares of b. Bank’s investments in Non- SLR

its own bank investments cannot exceed 10% of
the total deposits at the end of
previous year

c. Bank’s investments in Non- SLR d. Bank’s investments in Non- SLR

investments cannot exceed 10% of investments cannot exceed 15% of
the owned funds at the end of the total deposits at the end of
previous year previous year

Answers to check your progress

1.c 2.a 3.b

3.1.9 Terminal questions

What facilities extended by banks are covered under unsecured

exposure?
 List out the facilities which cannot be granted against shares by banks
1. Which one of the following is not one of the stages in project cycle?

a. Identification b. Preparation

c. Appraisal d. None of the above

2. The normal tenor of bank’s involvement in an infrastructure project

financed by them with a takeout finance arrangement is

a. 3-5 years b. 5- 7 years

c. 7- 10 years d. Beyond 10 years

Key to check your progress

1.d 2.a

3.2.8 Terminal questions

Write a brief note on the role of the banker in assessing viability of the
project.
List the methods available for monitoring the implementation of a
project.
1. A project is selected for implementation if its

a. NPV is zero b. NPV is positive

c. NPV is negative d. NPV has no bearing

2. The IRR should be ____________ if the project is to be selected for implementation

a. Zero b. Equal the bank rate

c. Equal the rate which can be d. Exceeding the benchmark rate

earned from another project of envisaged by the entrepreneur
same risk

3. Which of the following statements is correct?

a. In take out finance the actual b. In take out finance the actual
exposure of a bank can generally be exposure of a bank will generally
sold after 5 years not exceed 7 years
c. DSCR indicates the revenues vis- a d. DSCR indicates the liquidity of the
´- vis its total expenses business

Key to check your progress

1.b 2.d 3.a

 3.3.7 Terminal questions

Write a short note about take out finance and how it is useful to banks.

Why DSCR is a useful tool in fixing repayment term of a term loan?

1. Under turnover based method of credit assessment, the minimum

contribution from the borrower is

a. 5 % of the total sales b. 25% of sales

c. 20 % of sales d. 10 % of sales

2. Under MPBF method banks finance a maximum of

a. 25 % of current assets b. 20% of current assets

c. Difference between 75% of d. None of the above

current assets and other current
liabilities

3. Cash budget method of assessment is applicable to

a. All customers irrespective of their b. All customers whose borrowings

level of borrowing do not exceed Rs. 5 crores

c. Only those customers whose d. Only those borrowers whose

limits are more than Rs. 10 crores limits are more than Rs. 5 crores

Key to check your progress

1.a 2.c 3.d

3.4.13 Terminal questions

What are the different styles of financing the working capital needs of a
corporate whose requirement is Rs 10 crores?
Explain how multiple banking is different from consortium method of
lending.
1. Documentation is a process of --------------

a. Creating a charge over the b. Obtaining signature of borrowers

security on documents even if they are blank

c. Stamping the documents and d. a and c above

registering them
 2. Which of the following is not a mode of charge

a. Hypothecation b. Mortgage

c. Assignment d. Safe custody

3. Documents will be deemed to be properly stamped if---------

a. They bear stamps of less value b. Documents are executed before

than required since the deficit can stamping them
be rectified later

c. Stamp duty on the documents is d. a or b above

paid before execution

Key to check your progress

1.d 2.d 3.c

3.5.8 Terminal questions

Identify the following either True or False

Keeping some blanks in a document will not make it invalid (F)

Registration of lease for more than one year is compulsory under the law
(T)
Once the documents become barred by limitation, bank is barred from
filing a suit(F)

1. Monitoring and follow up of advances essentially means identifying

signals and taking correct measures to prevent the account becoming
NPA. (True/False)
2. Which of the following is not a source of signal for account turning bad?

a. Ledger account b. Stock inspection

c. Meeting with borrowers d. Default of more than 90 days

3. Preventive action would not include which of the following?

a. Discussion with the borrower b. Obtaining financial statements

c. Observing the conduct of the d. a and c above

account

Key to check your progress

1. True 2.d 3.b

 3.6.7 Terminal questions

Write a small note on the need for credit monitoring

List the sources which can be used for credit monitoring
1. What is the cut off limits for reporting cash transactions

a. Rs 5 lacs b. Rs. 2 lacs

c. Rs. 10 lacs d. Rs. 10 lac which are integrally

connected to each other

2. What is the maximum punishment for money laundering?

a. Rs. 5 lacs and 7 years of RI. b. Rs 5 lacs

c. 3 years of RI d. Rs 7 lacs and 5 years of RI

Key to check your progress

1.c 2.a

4.1.10 Terminal questions

Write short note on the functions of FIU-IND?

List the agencies governed by PML Act?

1. Which one of the following is not acceptable as a proof of identity under KYC?

a. Pass port b. Driving licence

c. Ration card d. Election identity card

2. Monitoring of transactions in case of a politically exposed person should be carried out

a. on monthly basis b. on a quarterly basis

c. half yearly basis d. on a regular basis

Key to check your progress

1.c 2.d

4.2.19 Terminal questions

Detail the reporting requirements by banks under PMLA.

List the documentary requirements for opening an account of a public

limited company.
 1. Money laundering refers to

a. Transfer of assets/cash from one b. Conversion of illegal money into

account to another legal money through banking
channels

c. Conversion of cash into gold for d. Conversion of assets into cash

hoarding deposited in Bank

2. Which of the following is not one of the important steps for opening of an
account for an NRI

a. Authentication/ verification of b. Authentication/ verification of

signature of NRI by a bank / our signature of NRI by his relative in
embassy in his country of domicile India

c. Authentication/ verification of d. Authentication/ verification of

signature of NRI by another NRI signature of NRI by a local customer
customer of the bank known to the bank

3. While opening the account of a company the most important document to be seen is

a. List of employees/ directors b. List of promoters/shareholders of

the company

c. Memorandum and articles of d. Instructions of the Registrar of

association companies

4. In case of opening account of a society, the important document to be seen is

a. Copy of bye laws of the society b. Certificate given by the ROC

c. Certificate given by the local d. No document is needed to be
authorities verified since societies are exempt
from this by the registrar

5. While opening the account of a partnership firm the most important document to be

produced by the firm is

a. Partners’ MOU b. Partnership deed and letter

c. Registration certification of the d. Partners’ tax clearance certificate

firm
 6. Current guidelines stipulate the customer needs to give copy of PAN card
even in case of deposits and remittances for amounts

a. Exceeding Rs. 20,000 b. Exceeding Rs. 10,000

c. Exceeding Rs. 50,000 d. Exceeding Rs. 25,000

7. The authority to which branches have to submit the report on suspicious transaction is

a. the controlling department in the b. the RBI

bank

c. FIU - India d. Concerned Police station

8. Bank branches are supposed to not open accounts of which of following organisations?

a. Banned terrorist organisations b. Banned terrorist organisations

identified and circulated by local identified and circulated by local
police personnel industry chambers

c. Banned terrorist organisations d. Banned terrorist organisations

identified and circulated by local identified and circulated by
ROC statutory authority (RBI)

9. Maximum length of imprisonment prescribed under PMLA for any violation of its provisions

is

a. 7 years b. 9 years

c. 10 years d. 12 years

10. Maximum cash penalty for violation of provisions of PMLA is

a. Rs. 15 lacs b. Rs. 25 lacs

c. Rs. 10 lacs d. Rs. 5 lacs

11. Maximum period for which banks are required to retain the records about the
reported suspicious transactions is

a. 5 years b. 8 years

c. 10 years d. 7 years
 12. An account will be classified as dormant/ inoperative account if

a. there are no debits/ credits in the b. dead account without any

account for specified period operations for a very long period

c. there are only debits but no d. it represents the fixed assets of

credits in the account for specified the bank
period

13. Which of the following is an indicator of suspicious transactions in a customer’s account?

a. deposit of high value third party b. sudden increase in cash deposits

cheques endorsed in favour of the without any valid reasons
account holder frequently

c. receipt or payment of large sums d. all of the above

of cash which have no obvious
purpose

14. Role of front line employees in a bank in respect of KYC guidelines is

a. identification of customers as per b. service with a smile while opening

extant guidelines accounts by customers

c. assist the customer in filling up d. provide efficient prompt and

the account opening forms courteous service

15. Unusual activities in respect of a customer’s accounts are

a. opening of account at a place b. frequent deposits of large sums of

other than the place of work money bearing labels of other banks
into the account

c. request of closure of newly d. all of the above

opened accounts where high value
transactions are already routed
through
 16. Which of the following documents can be accepted by banks as a proof of customer

identification?

a. electricity bill b. salary slip

c. income /wealth tax assessment d. election identity card

order

17. Threshold limit is to be fixed for each account by the bank

a. after 6 months from date of b. after 12 months from date of

opening of the account opening of the account

c. after 3 months from date of d. at the time of opening of the

opening of the account account

18. Periodicity for submission of cash transaction report to FIU-IND is

a. fortnightly b. monthly

c. bi monthly d. quarterly

19. Cash monitoring register is used for

a. noting down the receipts and b. noting down high value

payments of the branch transactions of customers

c. internal audit purposes d. for statutory audit purposes

20. Monitoring suspicious transactions is the responsibility of

a. officer in charge of the respective b. branch manager

accounts

c. controlling office personnel d. persons manning the counters

21. One of the objectives of KYC guidelines is to get protection under

a. SEBI act b. Consumer protection act

c. Section 87 of NI act d. Section 131 of NI act

 22. Introduction of a customer who is unable to produce direct identity by himself/herself can

be obtained

a. from a known customer who has b. from well-known authorities

complied with KYC norms

c. from a staff member if he knows d. any one of the above

the customer

23.For opening accounts of a public limited company, which of the following

documents is mandatory?

a. introduction by known customer b. certificate of incorporation /

of the bank certificate of commencement of
business

c. introduction by ROC d. none of the above

24. While opening the accounts of trust the essential documents to be verified are

a. Trust deed copy duly registered b. introduction of the trust by the

trustees

c. introduction from the registrar of d. none of the above

cooperative societies

25. The cut off limit for monitoring transactions is

a. all suspicious transactions b. all cash transactions above Rs. 10

irrespective of size lacs

c. both a and b above d. only debit transactions involving

cash of Rs. 10 lacs and above

26. Layering under money laundering refers to

a. disguising the origin of the money b. disguising the origin of the

deposited initially through multiple money deposited initially through
transfers multiple transactions
c. a and b above d. none of the above

27. Placement under money laundering means

a. smuggling bulk amounts of cash b. mix illicit proceeds with

legitimate deposits

c. deposit small amounts d. any one of the above

intentionally to avoid attention for
subsequent transfers after
accumulation

28. Checking of the accounts of politically exposed persons is to be carried

out at

a. the first point of accepting itself b. the first line supervisor level only

c. at the branch head level only d. only at the controlling office level

29. In terms of Banking Regulation Act, records means

a. account opening forms b. all vouchers

c. all registers /ledgers d. all of the above

30. Which of the following is not a source of money for money laundering?
a. money maintained by big b. money generated through
corporations for bribing persons smuggling
useful to them

c. money generated through normal d. money generated through

business gambling activities

Key to check your progress

1.b 2.b 3.c 4.a

5.c 6.c 7.a 8.d

9.c 10.d 11.c 12.a

13.d 14.a 15.d 16.d

17.d 18.b 19.b 20.a

21.d 22.a 23.b 24.a

25.c 26.b 27.c 28.a

29.d 30.c