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Banking questions

Q 1 What are the 4 Cs of credit? Ans. The four key element a borrower should have to obtain credit are:1 character (integrity) 2 capacity (sufficient cash flow to service the obligation) 3 capital (net worth or owned funds) 4 collateral (assets to secure the debt) Q 2. What is amortization? Ans. The gradual elimination of a liability, such as loan, by regular payment over a specified period of time. Such payment must be sufficient to cover both principal and interest. EMI are an example of this. Q 3. What are assets? Ans. Any item of economic value owned by an individual or corporation, especially that which can be converted to cash. Eg. Cash, car, real estate. Q 4. What are back-end load? Ans. A sales charge or a commission paid when an individual sells an investment, such as a mutual fund. It is intended to discourage selling. Q 5. What is a bill of exchange? Ans. An unconditional order issued by a person or a business which direct the receiver of the bill to pay a fixed sum of money to the third party at a future date. The future date may either fixed or negotiable. It should be in writing, signed and dated. Q 6. What is a bill of lading? Ans. A receipt which carries a description of goods and is issued by a shipping company which is ferrying the goods. Q 7. What is bridge financing? Ans. Financing extended to a person, company or other entity, using existing assets as collateral in order to acquire new assets. It is usually for short term and extended during the period leading upto the disbursement of the sanctioned loan.

Q 8. What is CAMELS stands for? Ans. It is an assessment of member banks by RBI to ascertain the capital adequacy, assets quality, management, earnings appraisal, liquidity, systems and controls. It is an assessments of the intrinsic strength of banks. Q 9. What is hedging? Ans. It is protecting assets from currency fluctuations. This can be done by taking positions or doing things which will offset the adverse effects on the original investment. Q 10. What is LIBOR? Ans. It is London interbank offering rate. It is the standard for international transactions by Indian entities. Q 11. What are non performing assets? Ans. A loan that is not meeting its stated principal and interest payments i.e. assets which are not generating income. Q 12. What is operating cycle? Ans. The average time between purchasing and acquiring inventory and receiving cash proceeds from its sale in finished goods form. Q 13. What is retail banking? Ans. Banking services for individual customers. Q 14. What are travellers cheque? Ans. Cheque issued by a financial institution which functions as a cash but is protected against loss or theft. These are useful when traveling, especially in case of overseas travelwhen all debit and credit card carried by a person will be acceptable. Q 15. What is the meaning of write-off? Ans. To charge an asset amount to expense or loss, in order to reduce the value of that assets and ones earning.