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Important- Basic Banking Awareness Questions

 1. MICR code consists of how many digits?
Ans: 9 digits.
(First three digits denotes city, next three digits representing the bank and the last three digits representing the bank branch)
2. What is the minimum limit in RTGS system?
Ans: 2 lakhs (there is no upper limit in RTGS)
3. What is full form of CTS?
Ans: Cheque Truncation System
4. Under which service, customers may access their bank account and perform basic transactions from any of the member branch offices.
Ans: Core Banking Solution (CBS)
5. Exchange of cash flow in different currency is known as:
Ans: Currency Swap
6. Assets or loans which stop performing after 90 days is known as:
Ans: Non Performing Asset (NPA)
7. Who controls the Monetary Policy in India?
Ans: RBI (Reserve Bank of India) 8. Which card is issued by NPCI (National Payments Corporation of India)?
Ans: RuPay Card
9. Definition of Current Account deficit:
Ans: A measurement of a country's trade in which the value of goods and services it imports exceeds the value of goods and services it exports.
10. Full form IFSC –
Ans: Indian Financial System Code
11. Commercial paper can be issued for a maximum period of:
Ans: 365 days or 1 year.
12. The Mutual funds in India follow accounting standards laid by:
Ans: SEBI (Securities and Exchange Board of India)
13. Minimum amount for Certificate of Deposit has been fixed at:
Ans: Rs. 1 Lakh
14. AML is a term mainly used in the financial and legal industries. Expand the term AML:
Ans: Anti Money Laundering
15. PIN is a number allocated to an individual and used to validate electronic transactions. Expand PIN:
Ans: Personal Identification Number
16. What is Repo rate?
Ans: It is the rate is the rate at which RBI lends money to the commercial banks.
17. What is Stale Cheque?
Ans: A cheque which is presented to a bank after 3 months from date of issue is considered as stale cheque and will often not be honored for cash or deposit at a bank.
18. What is Bancassurance?
Ans: The selling of life assurance and other insurance products and services by banking institutions.
19. The objective of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. What is the full form of KYC?
Ans: Know Your Customer (KYC)
20. Know Your Customer (KYC) guidelines are issued under:
Ans: Section 35A of the Banking Regulation Act, 1949
21. In BSBDA (Basic Savings Bank Deposit Account) the credits in a financial year does not exceed rupees:
Ans: Rs. 1 lakh
22. In BSBDA (Basic Savings Bank Deposit Account) the balance at any point of time does not exceed rupees:
Ans: Rs. 50,000
23. In BSBDA (Basic Savings Bank Deposit Account) the withdrawals and transfers in a month does not exceed rupees:
Ans: Rs. 10,000
24. At which rate RBI give loans to commercial banks?
Ans: Repo rate
25. Full form of CASA:
Ans: Current Account Saving Account
26. In what denominations Commercial Paper (CP) can be issued?
Ans: Rs. 5 lakh
27. What is the minimum denomination of Treasury bills to issue in India?
Ans: Rs. 25,000
28. Who cannot issue Certificate of Deposit (CD)?
Ans: Regional Rural Banks (RRBs) and Local Area Banks (LABs)
29. Expand ASBA:
Ans: Application Supported by Blocked Amount
30. Depositor Education and Awareness Fund (DEAF) is maintained with:
Ans: RBI
What is the amount of current asset? (CAIIB Solved Questions)

What is the amount of current asset? (CAIIB Solved Questions)

Question: Debt Equity Ratio is 3:1,the amount of Total assets Rs.20 lac, Current ratio is 3:2 and owned funds Rs.3 lac. What is the amount of current asset?

Debt Equity Ratio = Long Term Sources / Net worth/Equity = 3:1
Net worth/Equity= Owned Fund = 3Lac
Hence Long Term Source = 3/1 × 3Lac = 9Lac
Accounting Equation State that Total Liabilities + Equity = Total Assets
Total Assets = 20 Lac (Given)
Total Liabilities = Current Liabilities + Long Term Sources
Hence, Current Liabilities + Long Term Sources + Equity = Total Assets
Current Liabilities + 9Lac + 3lac = 20 Lac
Current Liabilities = 8Lac
Current Ratio = Current Assets/Current Liabilities
Current Ratio = 3/2
Current Assets = 3/2 × Current Liabilities
Current Assets = 3/2 × 8 = 12Lac

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Non Performing Assets (NPA)




  1. the account remains ‘out of order’ in respect of an Overdraft/Cash Credit (OD/CC).
  2. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted
  3. the installment of principal or interest there on remains overdue for two crop seasons for short duration crops,
  4. the installment of principal or interest there on remains overdue for one crop season for long duration crops,
  5. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction
  6. in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.
Banks should, classify an account as NPA only if the interest due and charged during any quarter is not serviced fully within 90 days from the end of the quarter.

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Weaker Sections & Priority sector Lending - Commercial Banks

Weaker Sections
Priority sector loans to the following borrowers will be considered under Weaker Sections category:-
(a) Small and marginal farmers;
(b) Artisans, village and cottage industries where individual credit limits do not exceed ` 50,000;
(c) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY), now National Rural Livelihood Mission (NRLM);
(d) Scheduled Castes and Scheduled Tribes;
(e) Beneficiaries of Differential Rate of Interest (DRI) scheme;
(f) Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY);
(g) Beneficiaries under the Scheme for Rehabilitation of Manual Scavengers (SRMS);
(h) Loans to Self Help Groups;
(i) Loans to distressed farmers indebted to non-institutional lenders;
(j) Loans to distressed persons other than farmers not exceeding ` 50,000 per borrower  to prepay their debt to non-institutional lenders;
(k) Loans to individual women beneficiaries upto ` 50,000 per borrower;
(l) Loans sanctioned under (a) to (k) above to persons from minority communities as may be notified by Government of India from time to time.
In States, where one of the minority communities notified is, in fact, in majority, item (l) will cover only the other notified minorities. These States/Union Territories are Jammu & Kashmir, Punjab, Meghalaya, Mizoram, Nagaland and Lakshadweep.
 
As per RBI Guidelines for Domestic commercial banks / Foreign banks with 20 and above branches:

Net Worth Calculations & Solved Example ( CAIIB)


Net worth in simple words refers to net assets which imply total assets less total liabilities of the company. In order to calculate net worth of a company one should add Equity share capital, Preference share capital, Reserves and Surplus available with the firm and deduct from this all fictitious assets or intangible items like miscellaneous expenditure, preliminary expenses and so on.

Debts are not considered in the calculation of net worth of the company. It is also called owner’s equity as it does not include outsider’s debt like debentures, long term loan, bank loan etc


Example:

Given a firm has the following financial figures in its balance sheet, what is its net worth?
  • Capital: Rs 12 lac
  • Reserve: Rs 4 lac
  • Unsecured loan: Rs 5 lac
  • Current assets: Rs 16 lac
  • Pre operative expenses: Rs 2 lac

Hence: Net Worth = Capital + Reserve - Pre-operative Expenses
                              = 12 Lac + 4Lac − 2Lac
            Net Worth = 14Lac

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Major objective of computerization in banking

JAIIB Principles of Banking previous questions explanation series


Question: Who doesn't comes under low risk category under KYC guidelines?
Options: 
A:Customer service
B:Housekeeping
C:CBS
D:Decision-making
Answer: Option C -CBS
Detailed explanation
BANK COMPUTERISATION & Need for Bank Computerization

The four major objectives of computerization in banking are to improve:
(a) customer service     
(b) housekeeping
(c) decision-making      
(d) productivity and profitability.

Speed and accuracy are the hallmarks of computers. Computers have a vital role to play wherever there is a huge volume of transactions and the work needs completion within a specified period. 
The main objectives of computerization at the branch level is to improve customer service, quality of housekeeping and generation of data for better management control. At the regional and head office levels, the purpose of computerization is to store, analyse and retrieve data received from branches, generating information speedily, thereby strengthening the internal control over branches for policy formulation.

Who doesn't comes under low risk category under KYC guidelines?

JAIIB Principles of Banking previous questions explanation series

 

Question: Who doesn't comes under low risk category under KYC guidelines?

Options: 

A:Persons from lower strata of the society

B:Salaried employees

C:Trusts

D:Govt Departments

Answer: Option C -Trusts

Detailed explanation

The objective of the KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. One of the element of KYC guideline is Customer Acceptance Policy(CAP), Which indicates the criteria for acceptance of customers to be followed by the bank.

 

Parameters of risk perception is defined in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status etc., to enable categorization of customers into low, medium and high risk called Level I, Level II and Level III respectively.
 
High Risk (Level III): The branches may apply enhanced due diligence measures based on the risk assessment, thereby requiring intensive ‘due diligence’ for higher risk customers, especially those for whom the sources of funds are not clear.
The examples of customers requiring higher due diligence may include :
a) Non Resident Customers,
b) High Net worth individuals
c) Trusts, charities, NGOs and organizations receiving donations,
d) Companies having close family shareholding or beneficial ownership
e) Firms with ‘sleeping partners’
f) Politically Exposed Persons (PEPs) of foreign origin
g) Non-face to face customers, and
h) Those with dubious reputation as per public information available, etc.

 

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